Cognizant Provides COVID-19 Business Update
Expects first quarter revenue within previously guided range
TEANECK, N.J., April 9, 2020 /PRNewswire/ -- Cognizant Technology Solutions Corporation (Nasdaq: CTSH), one of the world's leading professional services companies, today announced certain updates in response to the impact of the novel coronavirus (COVID-19) on business operations.
"Our priorities remain the health and safety of our associates and the business continuity of our clients," said Brian Humphries, Chief Executive Officer. "We are committed to helping our clients as they navigate unprecedented business challenges as well as supporting the efforts of governments globally to contain the spread of the virus.
"I am pleased with our business momentum in the first two months of the quarter and grateful for the dedication and professionalism of our associates in March, both of which enabled us to meet our previously announced revenue guidance. We acted decisively to limit COVID-19's impact on our business, including rapidly enabling work-from-home capabilities across our delivery teams. We will continue to take steps to protect our associates and support the evolving needs of clients in today's environment.
"In this fluid environment where uncertainty prevails, we are well-positioned with deep client relationships across more than a dozen industries, and a strong balance sheet that provides solid financial flexibility. As ever, we stand committed to help our clients manage through economic, technological and other disruptions through our innovative solutions and talented associates," Humphries continued. "I am proud of our 292,000 associates who have risen to the challenge of serving our clients with empathy, initiative and courage, and confident that we will emerge from this global crisis stronger together."
Update on First Quarter Financial Results & Withdrawal of Full-Year Guidance
First quarter revenue is expected to be $4.22-$4.23 billion, up 2.7-2.9% (3.4-3.6% in constant currency)1 from the prior-year quarter, including a negative 50 basis point impact from the exit of certain content services. Financial performance in the first two months of the quarter was on track to exceed previous guidance, driven by strong performance across our North America market. During the latter part of March, COVID-19 increasingly affected Cognizant's business due largely to:
Entering the second quarter, Cognizant expects the pandemic to further reduce client demand as its societal and economic impact causes broader disruptions across industries.
The long-term fundamentals of our business remain strong. However, given the unprecedented nature of this crisis, uncertainty around its duration and its impact on our ability to forecast performance, the Company is withdrawing its 2020 guidance that was provided on February 5, 2020.
Actions to Strengthen Financial Flexibility
Cognizant has proactively taken steps to strengthen its financial flexibility, including drawing down $1.74 billion on its revolving credit facility on March 23, 2020, bringing the Company's total cash and investment balance as of March 31st to approximately $4.7 billion2, or net cash1 of $2.2 billion. The Company has no significant debt maturities until 2023.
During the first quarter Cognizant completed the acquisitions of Code Zero and Lev and repurchased approximately 8 million shares. Since March 31st, Cognizant has not initiated any new share repurchase programs.
"We are confident that the combination of our strong balance sheet, and our robust operating and cash generative business model, will enable us to weather this disruption," said Karen McLoughlin, Chief Financial Officer. "The execution of our 2020 Fit for Growth program along with prudently managing our cost structure to react quickly to changes in the demand environment is critical to maintaining financial flexibility to navigate near-term headwinds while repositioning the business for long-term success."
1 Constant currency revenue growth and net cash are defined by the Securities and Exchange Commission as non-GAAP financial measures. See "About Non-GAAP Financial Measures" for more information at the end of this release.
Continued Commitment to Our Associates & Communities Globally
Cognizant remains committed to supporting its associates as they work to meet clients' quickly evolving needs. Towards that end, and in recognition of the extraordinary continuity-of-service efforts of the Company's associates in India and the Philippines, Cognizant will provide those at the Associate level and below with an additional payment of 25% of their base pay for the month of April. Additionally, Cognizant has standardized 14 days sick-leave coverage globally for COVID-19 cases or self-quarantine without impacting other sick leave or vacation programs.
The Company is also committed to contributing to the global effort to deliver immediate relief to victims of the COVID-19 pandemic. On April 1, Cognizant announced a $10 million philanthropic commitment to support communities around the world in addressing the pandemic's immediate and long-term impacts. Cognizant and its U.S. and India-based foundations will provide critical resources to strengthen public health systems, education and workforce institutions, and the economic outlook of communities worldwide.
COVID-19 Fireside Chat
Cognizant's Head of Investor Relations Katie Royce will host a fireside chat with Brian Humphries and Karen McLoughlin on April 9, 2020, at 8:30 a.m. (Eastern) to provide additional details regarding today's business update. To listen to the discussion, please dial +1 (877) 810-9510 (domestically) or +1 (201) 493-6778 (internationally).
The discussion will also be available on the Investor Relations section of the Cognizant website at http://investors.cognizant.com.
For those who cannot access the live broadcast, a replay will be available. To listen to the replay, please dial +1 (877) 660-6853 (domestically) or +1 (201) 612-7415 (internationally) and enter 13701842 from two hours after the end of the discussion until 11:59 p.m. (Eastern) on April 23, 2020. The replay will also be available at Cognizant's website www.cognizant.com for 30 days following the call.
First Quarter 2020 Financial Results and Conference Call
Cognizant will host a conference call on May 7, 2020, at 5:00 p.m. (Eastern) to discuss the Company's first quarter results. To listen to the conference call, please dial +1 (877) 810-9510 (domestically) or +1 (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. To listen to the replay, please dial +1 (877) 660-6853 (domestically) or +1 (201) 612-7415 (internationally) and enter 13701787 from two hours after the end of the call until 11:59 p.m. (Eastern) on May 21, 2020. The replay will also be available at Cognizant's website www.cognizant.com for 60 days following the call.
Financial Disclosure Advisory
About Non-GAAP Financial Measures
Constant currency revenue growth is defined as revenues for a given period restated at the comparative period's foreign currency exchange rates measured against the comparative period's reported revenues. Net cash is defined as cash and cash equivalents and investments less short-term and long-term debt. We estimate that as of March 31, 2020 cash and cash equivalents were approximately $3.9 billion, investments were approximately $0.8 billion, short-term debt was approximately $1.8 billion and long-term debt was approximately $0.7 billion.
Management believes providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for our executive officers and for making comparisons of our operating results to those of our competitors. Therefore, it is our belief that the use of non-GAAP financial measures provides a meaningful supplemental measure for investors to evaluate our financial performance. Accordingly, we believe that the presentation of constant currency revenue growth and net cash, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.
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Company Codes: NASDAQ-NMS:CTSH
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