COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION Executive Summary
Cognizant is one of the world's leading professional services companies, engineering modern business for the digital era. Our services include digital services and solutions, consulting, application development, systems integration, application testing, application maintenance, infrastructure services and business process services. Digital services are an important part of our portfolio, aligning with our clients' focus on becoming data-enabled, customer-centric and differentiated businesses. We are continuing to invest in digital services with a focus on four key areas: IoT, digital engineering, data and cloud. We tailor our services and solutions to specific industries with an integrated global delivery model that employs client service and delivery teams based at client locations and dedicated global and regional delivery centers. We help clients modernize technology, reimagine processes and transform experiences so they can stay ahead in a fast-changing world. OnJuly 6, 2022 , we announced that we will be simplifying our internal operating structure around practice areas and delivery operations by merging our Digital Business & Technology and Digital Business Operations practice areas with their respective delivery organizations to create four new integrated practices: Software & Platform Engineering, Core Technologies & Insights, Enterprise Platform Services, and Intuitive Operations & Automation. This change did not impact our reportable business segments. Q3 2022 Financial Results Revenue Income from Operations Operating Margin Diluted EPS [[Image Removed: ctsh-20220930_g2.jpg]] [[Image Removed: ctsh-20220930_g3.jpg]] [[Image Removed: ctsh-20220930_g4.jpg]] [[Image Removed: ctsh-20220930_g5.jpg]] GAAP Adjusted1 GAAP Adjusted1 GAAP Adjusted1 Revenue up$113 million Income from Operations up Operating margin up 100 Diluted EPS up$0.19 or 18.4% from Q3 2021 or 2.4% from Q3 2021;$69 million or 9.5% from bps from Q3 2021 5.6% in constant Q3 2021 Adjusted Diluted EPS1 up$0.11 or 10.4% from Q3 2021 currency1 Adjusted Operating Adjusted Income from Margin1 up 60 bps from Q3 Operations1 up$49 2021 million or 6.5% from Q3 2021 During the quarter endedSeptember 30, 2022 , revenues increased by$113 million as compared to the quarter endedSeptember 30, 2021 , representing growth of 2.4%, or 5.6% on a constant currency basis1. Our recently completed acquisitions contributed 40 basis points to revenue growth while the previously disclosed sale of the Samlink subsidiary, which was completed onFebruary 1, 2022 , negatively impacted revenue growth by 60 basis points. Revenue growth was strongest in our Communications, Media and Technology and our Products and Resources segments. Revenues in our Financial Services segment reflect the negative impact of the previously disclosed sale of the Samlink subsidiary, which was completed onFebruary 1, 2022 . For further details, see the 'Revenues - Reportable Business Segments' section within the Results of Operations. Revenue growth was driven by our clients' continued adoption and integration of digital technologies as well as pricing improvements but was negatively impacted by challenges attracting and retaining personnel. For the three months endedSeptember 30, 2022 , our annualized attrition, including both voluntary and involuntary, was 34.9% as compared to 37.0% for the three months endedSeptember 30, 2021 . Attrition and hiring challenges have also resulted in increased cost of delivery. 1 Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant currency revenue growth are not measures of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable. Cognizant Technology Solutions 23 September 30, 2022 Form 10-Q
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Table of Contents
Operating margin increased to 16.4% for the quarter endedSeptember 30, 2022 from 15.4% for the quarter endedSeptember 30, 2021 . Our 2022 operating margin was positively impacted by economies of scale that allowed us to leverage our cost structure over a larger organization, delivery efficiencies, pricing improvements and the depreciation of the Indian rupee against theU.S. dollar, partially offset by increased compensation costs for our delivery personnel (including employees and subcontractors). Our 2021 GAAP operating margin was negatively impacted by the Class Action Settlement Loss, which was excluded from our Adjusted Operating Margin2 in 2021.
Business Outlook
We continue to expect the long-term focus of our clients to be on their digital transformation into software-driven, data-enabled, customer-centric and differentiated businesses. Our four strategic priorities are:
•Accelerating digital - growing our digital business organically and inorganically;
•Globalizing Cognizant - accelerating the growth of our business in key international markets and diversifying our leadership, capabilities and delivery footprint;
•Increasing our relevance to our clients - ensuring industry-aligned thought leadership and capabilities to address clients' business needs; and
•Repositioning our brand - improving our global brand recognition and becoming better known as a global digital partner to the entire C-suite.
Clients will likely continue to contend with industry-specific changes driven by evolving digital technologies, uncertainty in the regulatory environment, industry consolidation and convergence as well as international trade policies and other macroeconomic factors, including the increasing uncertainty related to the global economy, which could affect their demand for our services. As a global professional services company, we compete on the basis of the knowledge, experience, insights, skills and talent of our employees and the value they can provide to our clients. Our success is dependent, in large part, on our ability to keep our supply of skilled employees, in particular those with experience in key digital areas, in balance with client demand. Competition for skilled employees in the current labor market is intense, and we continue to experience significantly elevated voluntary attrition. Challenges attracting and retaining personnel have resulted in increased cost of delivery and negatively impacted our ability to satisfy client demand. We expect these impacts to continue for at least the remainder of 2022. Further, our ongoing and anticipated future efforts with respect to recruitment, talent management and employee engagement may not be successful and are likely to continue to result in increased compensation costs. While we strive to adjust pricing to reduce the impact of compensation increases on our operating margin, we may not be successful in fully recovering these increases, which could adversely affect our profitability. The invasion ofUkraine byRussia and the sanctions and other measures being imposed in response to this conflict have increased the level of economic and political uncertainty worldwide. We do not have employees, facilities or significant operations in eitherRussia orUkraine and revenues generated from clients in both countries were immaterial in both 2021 and the first nine months of 2022. However, the continuation of the hostilities or the expansion of the current conflict's scope into surrounding geographic areas could impact us, our clients, vendors or subcontractors, which could impact our operations and financial performance. We continue to monitor the situation closely to ensure business continuity plans are in place for neighboring countries where we have a presence.
Our future results may be affected by potential tax law changes and other
potential regulatory changes, including possible
2 Adjusted Operating Margin is not a measure of financial performance prepared
in accordance with GAAP. See "Non-GAAP Financial Measures" for more information
and reconciliations to the most directly comparable GAAP financial measure, as
applicable.
Cognizant Technology Solutions 24 September 30, 2022 Form 10-Q
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Table of Contents Results of Operations
Three Months Ended
The following table sets forth, for the periods indicated, certain financial
data for the three months ended
% of % of Increase / Decrease
(Dollars in millions, except per share data) 2022 Revenues 2021 Revenues $ % Revenues$ 4,857 100.0$ 4,744 100.0$ 113 2.4 Cost of revenues(a) 3,080 63.4 2,947 62.1 133 4.5 Selling, general and administrative expenses(a) 838 17.3 924 19.5 (86)
(9.3)
Depreciation and amortization expense 141 2.9 144 3.0 (3) (2.1) Income from operations 798 16.4 729 15.4 69 9.5 Other income (expense), net 14 2 12
600.0
Income before provision for income taxes 812 16.7 731 15.4 81 11.1 Provision for income taxes (183) (187) 4 (2.1) Net income$ 629 13.0$ 544 11.5$ 85 15.6 Diluted earnings per share$ 1.22 $ 1.03 $ 0.19 18.4 Other Financial Information3 Adjusted Income from Operations and Adjusted Operating Margin$ 798 16.4$ 749 15.8$ 49 6.5 Adjusted Diluted EPS$ 1.17 $ 1.06 $ 0.11 10.4
(a)Exclusive of depreciation and amortization expense.
Revenues - Overall During the quarter endedSeptember 30, 2022 , revenues increased by$113 million as compared to the quarter endedSeptember 30, 2021 , representing growth of 2.4%, or 5.6% on a constant currency basis3. Our recently completed acquisitions contributed 40 basis points to revenue growth while the previously disclosed sale of the Samlink subsidiary, which was completed onFebruary 1, 2022 , negatively impacted revenue growth by 60 basis points. Revenue growth was driven by our clients' continued adoption and integration of digital technologies as well as pricing improvements but was negatively impacted by challenges attracting and retaining personnel. Revenues from clients added sinceSeptember 30, 2021 were$96 million . 3 Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant currency revenue growth are not measures of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable. Cognizant Technology Solutions 25 September 30, 2022 Form 10-Q
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Table of Contents
Revenues - Reportable Business Segments
The following charts set forth revenues and change in revenues by business
segment and geography for the three months ended
Financial Services Health Sciences
Increase / (Decrease) Increase / (Decrease)
Dollars in millions Revenues $ % CC4 Revenues $ % CC %4
North America $ 1,086 11 1.0 1.2 $ 1,212 50 4.3 4.3
United Kingdom 148 8 5.7 18.6 41 (3) (6.8) 5.0
Continental Europe 143 (44) (23.5) (13.3) 119 1 0.8 12.6
Europe - Total 291 (36) (11.0) 0.4 160 (2) (1.2) 10.5
Rest of World 144 2 1.4 7.6 33 3 10.0 22.6
Total $ 1,521 (23) (1.5) 1.6 $ 1,405 51 3.8 5.5
Products and Resources Communications, Media and Technology
Increase / (Decrease) Increase / (Decrease)
Dollars in millions Revenues $ % CC %4 Revenues $ % CC %4
North America $ 779 30 4.0 4.3 $ 544 44 8.8 8.8
United Kingdom 130 5 4.0 20.8 127 6 5.0 21.7
Continental Europe 143 (2) (1.4) 13.6 33 (1) (2.9) 12.0
Europe - Total 273 3 1.1 16.9 160 5 3.2 19.6
Rest of World 96 8 9.1 14.2 79 (5) (6.0) 2.5
Total $ 1,148 41 3.7 8.2 $ 783 44 6.0 10.4
Financial Services - revenues declined 1.5%, and increased by 1.6% on a constant
currency basis4
[[Image Removed: ctsh-20220930_g6.jpg]]
Banking ê $46M
Insurance é $23M
Revenues declined in this segment but grew on a constant currency basis.
Constant currency revenue growth was driven by the growing demand for digital
services among public sector clients in the United Kingdom and insurance
clients. This was offset by the 180 basis points negative impact related to the
previously disclosed sale of the Samlink subsidiary, which was completed on
February 1, 2022 . Revenues from clients added since September 30, 2021 were $22
million .4
Health Sciences - revenues increased 3.8%, or 5.5% on a constant currency basis4
Effective in the second quarter of 2022, we combined the healthcare operating segment with the life sciences operating segment and renamed our Healthcare reportable segment as Health Sciences. See Note 11 to our unaudited consolidated financial statements for additional information.
Revenue growth was driven by increased demand for digital services among
pharmaceutical clients. Revenues from clients added since
[[Image Removed: ctsh-20220930_g7.jpg]]
é $51M
4 Constant currency revenue growth is not a measure of financial performance
prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more
information.
Cognizant Technology Solutions 26 September 30, 2022 Form 10-Q
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Table of Contents
Products and Resources - revenues increased 3.7%, or 8.2% on a constant currency
basis5
[[Image Removed: ctsh-20220930_g8.jpg]]
Manufacturing, Logistics, Energy and Utilities é $18M
Retail and Consumer Goods é $7M
Travel and Hospitality é $16M
Revenue growth in this segment was primarily driven by demand for our digital
services among logistics, automotive, consumer goods and travel and hospitality
clients. Revenues from clients added since September 30, 2021 were $30 million .5
Communications, Media and Technology - revenues increased 6.0%, or 10.4% on a constant currency basis5
In 2022, we combined the communications and media operating segment with the technology operating segment. See Note 11 to our unaudited consolidated financial statements for additional information.
Revenues in this segment reflected growing demand from our technology clients for services related to digital content, primarily driven by the largest clients in this segment, as well as demand for personalized user experiences and data modernization. Revenues from clients added sinceSeptember 30, 2021 were$33 million . [[Image Removed: ctsh-20220930_g9.jpg]] é$44M
Revenues - Geographic Markets
Revenues of
[[Image Removed: ctsh-20220930_g10.jpg]]
Q3 2022 as compared to Q3 2021 Increase / (Decrease)
(Dollars in millions) $ % CC %5
North America $ 135 3.9 4.0
United Kingdom 16 3.7 18.7
Continental Europe (46) (9.5) 2.9
Europe - Total (30) (3.3) 10.3
Rest of World 8 2.3 9.3
Total revenues $ 113 2.4 5.6
North America continues to be our largest market, representing 74.6% of total
revenues. Outside of the North America region, revenues were negatively impacted
by foreign currency exchange rate movements. Constant currency revenue growth in
the United Kingdom was strong among Financial Services clients, including
certain public sector clients, Products and Resources clients, and
Communications, Media and Technology clients. Constant currency revenue growth
in the Continental Europe region was driven by our pharmaceutical clients,
Products and Resources clients, and Communications, Media and Technology
clients, while the previously disclosed sale of the Samlink subsidiary, which
was completed on February 1, 2022 , negatively impacted growth in the region by
580 basis points.
Cost of Revenues (Exclusive of Depreciation and Amortization Expense)
[[Image Removed: ctsh-20220930_g11.jpg]]
é $133M
é 1.3% as a % of revenues
¡ % of Revenues
Our cost of revenues consists primarily of salaries, incentive-based
compensation, stock-based compensation expense, employee benefits,
project-related immigration and travel for technical personnel, subcontracting
and equipment costs relating to revenues. The increase, as a percentage of
revenues, was due to higher compensation costs for delivery personnel (including
employees and subcontractors), partially offset by delivery efficiencies and the
depreciation of the Indian rupee against the U.S. dollar. Challenges attracting
and retaining highly qualified personnel have resulted and are likely to
continue to result in higher compensation costs.
5 Constant currency revenue growth is not a measure of financial performance
prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more
information.
Cognizant Technology Solutions 27 September 30, 2022 Form 10-Q
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Table of Contents
SG&A Expenses (Exclusive of Depreciation and Amortization Expense)
SG&A expenses consist primarily of salaries, incentive-based compensation,
stock-based compensation expense, employee benefits, immigration, travel,
marketing, communications, management, finance, administrative and occupancy
costs. The decrease, as a percentage of revenues, was primarily due to economies
of scale that allowed us to leverage our cost structure over a larger
organization, the beneficial impact of foreign currency exchange rate movements
and the optimization of non-strategic SG&A expenses.
[[Image Removed: ctsh-20220930_g12.jpg]]
ê $86M
ê 2.2% as a % of revenues
¡ % of Revenues
Depreciation and Amortization Expense
Depreciation and amortization expense decreased by 2.1%, or 0.1% as a percentage of revenues, during the third quarter of 2022 as compared to the third quarter of 2021.
Operating Margin and Adjusted Operating Margin6 - Overall
[[Image Removed: ctsh-20220930_g13.jpg]][[Image Removed: ctsh-20220930_g14.jpg]]
Our 2022 operating margin was positively impacted by economies of scale that allowed us to leverage our cost structure over a larger organization, delivery efficiencies, pricing improvements and the depreciation of the Indian rupee against theU.S. dollar, partially offset by increased compensation costs for our delivery personnel (including employees and subcontractors). Our 2021 GAAP operating margin was negatively impacted by the Class Action Settlement Loss, which was excluded from our Adjusted Operating Margin6 in 2021. A predominant portion of our costs inIndia are denominated in the Indian rupee, representing approximately 23% of our global operating costs during the three months endedSeptember 30, 2022 . These costs are subject to foreign currency exchange rate fluctuations, which have an impact on our results of operations. We enter into foreign exchange derivative contracts to hedge certain Indian rupee denominated payments inIndia . These hedges are intended to mitigate the volatility of the changes in the exchange rate between theU.S. dollar and the Indian rupee. Net of the impact of the hedges, the depreciation of the Indian rupee contributed 78 basis points to the improvement in our operating margin for the three months endedSeptember 30, 2022 as compared to the three months endedSeptember 30, 2021 . Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against theU.S. dollar positively impacted our operating margin by 137 basis points during the three months endedSeptember 30, 2022 . Each additional 1.0% change in exchange rate between the Indian rupee and theU.S. dollar will have the effect of moving our operating margin by 18 basis points (excluding the impact of the hedges). The settlement of our cash flow hedges negatively impacted our operating margin by 27 basis points during the three months endedSeptember 30, 2022 while positively impacting our operating margin by 32 basis points during the three months endedSeptember 30, 2021 . We finished the third quarter of 2022 with approximately 349,400 employees. Annualized attrition, including both voluntary and involuntary, was approximately 34.9% for the three months endedSeptember 30, 2022 . In both 2021 and 2022, voluntary attrition constituted the vast majority of attrition for the period. Attrition in all periods presented is weighted towards our more junior employees. [[Image Removed: ctsh-20220930_g15.jpg]] ¡ Annualized attrition
6 Adjusted Income from Operations and Adjusted Operating Margin are not measures of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
Cognizant Technology Solutions 28 September 30, 2022 Form 10-Q
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Table of Contents Segment Operating Profit In 2022, we made certain changes to the internal measurement of segment operating profits for the purpose of evaluating segment performance and resource allocation. The primary reason for the change was to charge to the business segments costs that are directly managed and controlled by them. Specifically, segment operating profit now includes costs related to non-delivery personnel that support consulting services, which were previously included in "unallocated costs." We have reported 2022 segment operating profits using the new allocation methodology and have recast the 2021 results to conform to the new methodology.
Segment operating profit and operating margin percentage were as follows:
[[Image Removed: ctsh-20220930_g16.jpg]]
[[Image Removed: ctsh-20220930_g17.jpg]]
[[Image Removed: ctsh-20220930_g18.jpg]]
[[Image Removed: ctsh-20220930_g19.jpg]]
In 2022, segment operating margins benefited from delivery efficiencies, pricing
improvements and the depreciation of the Indian rupee against the U.S. dollar
partially offset by increased compensation costs for delivery personnel
(including employees and subcontractors).
Total segment operating profit and operating margin were as follows for the
three months ended
2022 % of Revenues 2021 % of Revenues Increase
Total segment operating profit $ 1,527 31.4 $ 1,423 30.0 $ 104
Less: unallocated costs 729 694 35
Income from operations $ 798 16.4 $ 729 15.4 $ 69
Other Income (Expense), Net
The following table sets forth total other income (expense), net for the three
months ended
Increase/
(in millions) 2022 2021 Decrease
Foreign currency exchange (losses) $ (48) $ (4) $ (44)
Gains on foreign exchange forward contracts not
designated as hedging instruments 51 1 50
Foreign currency exchange gains (losses), net 3 (3) 6
Interest income 17 7 10
Interest expense (6) (3) (3)
Other, net - 1 (1)
Total other income (expense), net $ 14 $ 2 $ 12
The foreign currency exchange losses were attributed to the remeasurement of net
monetary assets and liabilities denominated in currencies other than the
functional currencies of our subsidiaries. The gains on foreign exchange forward
contracts not designated as hedging instruments related to the realized and
unrealized gains and losses on contracts entered into to offset our foreign
currency exposures. As of September 30, 2022 , the notional value of our
undesignated hedges was $1,210 million . The increase in interest income of $10
million was primarily attributable to higher interest rates in the current
period.
Provision for Income Taxes
[[Image Removed: ctsh-20220930_g20.jpg]]
ê $4M
¡ Effective Income Tax Rate ê 3.1%
The effective income tax rate decreased primarily due to the recognition in the
third quarter of 2022 of an income tax benefit of $36 million related to a
specific uncertain tax position that was previously unrecognized in our
prior-year consolidated financial statements. See Note 6 to our unaudited
consolidated financial statements for additional information.
Cognizant Technology Solutions 29 September 30, 2022 Form 10-Q
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Table of Contents Net Income
The increase in net income was primarily driven by higher income from operations and a lower effective tax rate.
[[Image Removed: ctsh-20220930_g21.jpg]] é$85M ¡ é 1.5% of Revenues Non-GAAP Financial Measures Portions of our disclosure include non-GAAP financial measures. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures to the corresponding GAAP measures set forth below should be carefully evaluated. Our non-GAAP financial measures Adjusted Operating Margin and Adjusted Income From Operations exclude unusual items, such as the Class Action Litigation Settlement in the third quarter of 2021. Our non-GAAP financial measure Adjusted Diluted EPS excludes unusual items, such as the Class Action Litigation Settlement in the third quarter of 2021 and the effect of recognition in the third quarter of 2022 of an income tax benefit related to a specific uncertain tax position that was previously unrecognized in our prior-year consolidated financial statements, net non-operating foreign currency exchange gains or losses and the tax impact of all the applicable adjustments. The income tax impact of each item excluded from Adjusted Diluted EPS is calculated by applying the statutory rate and local tax regulations in the jurisdiction in which the item was incurred. 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. We believe providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into our operating results. For 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 executive officers and for making comparisons of our operating results to those of our competitors. We believe that the presentation of non-GAAP financial measures, which exclude certain costs, along with reconciliations to the most comparable GAAP measure, as applicable, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations. A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP financial measures may exclude costs that are recurring such as net non-operating foreign currency exchange gains or losses. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures to allow investors to evaluate such non-GAAP financial measures. Cognizant Technology Solutions 30 September 30, 2022 Form 10-Q
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Table of Contents
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the three months endedSeptember 30 : % of % of 2022 Revenues 2021 Revenues GAAP income from operations and operating margin$ 798 16.4$ 729 15.4 Class Action Settlement Loss (1) - - 20 0.4 Adjusted Income from Operations and Adjusted Operating Margin$ 798 16.4$ 749 15.8 GAAP diluted EPS$ 1.22 $ 1.03 Effect of above adjustments, pre-tax - 0.04 Non-operating foreign currency exchange (gains) losses, pre-tax (2) (0.01) 0.01 Tax effect of above adjustments (3) 0.03 (0.02)
Effect of recognition of income tax benefit related to an uncertain tax position (4)
(0.07) -
Adjusted Diluted EPS $ 1.17 $ 1.06
(1)During the three months ended September 30, 2021 , we recorded a Class Action
Settlement Loss in "Selling, general and administrative expenses" in our
unaudited consolidated financial statements. For further information, see "Note
15 - Commitments and Contingencies" in the notes to the consolidated financial
statements in our Annual Report on Form 10-K for the year ended December 31,
2021 .
(2)Non-operating foreign currency exchange gains and losses, inclusive of gains
and losses on related foreign exchange forward contracts not designated as
hedging instruments for accounting purposes, are reported in "Foreign currency
exchange gains (losses), net" in our unaudited consolidated statements of
operations.
(3)Presented below are the tax impacts of each of our non-GAAP adjustments to
pre-tax income:
Three Months Ended
September 30,
(in millions) 2022 2021
Non-GAAP income tax benefit (expense) related to:
Class Action Settlement Loss - 6
Foreign currency exchange gains and losses (15) 3
The effective tax rate related to non-operating foreign currency exchange gains
and losses varies depending on the jurisdictions in which such income and
expenses are generated and the statutory rates applicable in those
jurisdictions. As such, the income tax effect of non-operating foreign currency
exchange gains and losses shown in the above table may not appear proportionate
to the net pre-tax foreign currency exchange gains and losses reported in our
unaudited consolidated statements of operations.
(4)During the three months ended September 30, 2022 , we recognized an income tax
benefit of $36 million related to a specific uncertain tax position that was
previously unrecognized in our prior-year consolidated financial statements. The
recognition of the benefit in the third quarter of 2022 was based on
management's reassessment regarding whether this unrecognized tax benefit met
the more-likely-than-not threshold in light of the lapse in the statute of
limitations as to a portion of such benefit.
Cognizant Technology Solutions 31 September 30, 2022 Form 10-Q
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Table of Contents Nine Months EndedSeptember 30, 2022 Compared to Nine Months EndedSeptember 30, 2021
The following table sets forth, for the periods indicated, certain financial
data for the nine months ended
% of % of Increase / Decrease
(Dollars in millions, except per share data) 2022 Revenues 2021 Revenues $ %
Revenues $ 14,589 100.0 $ 13,730 100.0 $ 859 6.3
Cost of revenues(a) 9,296 63.7 8,574 62.4 722 8.4
Selling, general and administrative
expenses(a) 2,583 17.7 2,632 19.2 (49) (1.9)
Depreciation and amortization expense 428 2.9 430 3.1 (2) (0.5) Income from operations 2,282 15.6 2,094 15.3 188 9.0 Other income (expense), net 20 (4) 24 * Income before provision for income taxes 2,302 15.8 2,090 15.2 212
10.1
Provision for income taxes (537) (531) (6)
1.1
Income (loss) from equity method investments 4 2 2 100.0 Net income$ 1,769 12.1$ 1,561 11.4$ 208 13.3 Diluted EPS$ 3.40 $ 2.96 $ 0.44 14.9 Other Financial Information7 Adjusted Income From Operations and Adjusted Operating Margin$ 2,282 15.6$ 2,114 15.4$ 168 7.9 Adjusted Diluted EPS$ 3.40 $ 3.02 $ 0.38 12.6
(a)Exclusive of depreciation and amortization expense.
*Not meaningful Revenues - Overall During the nine months endedSeptember 30, 2022 , revenues increased by$859 million as compared to the nine months endedSeptember 30, 2021 , representing growth of 6.3%, or 8.6% on a constant currency basis7. Our recently completed acquisitions contributed 120 basis points to revenue growth while the previously disclosed sale of the Samlink subsidiary, which was completed onFebruary 1, 2022 , negatively impacted revenue growth by 60 basis points. Revenue growth was driven by our clients' continued adoption and integration of digital technologies but was negatively impacted by challenges attracting and retaining personnel. Revenues from clients added sinceSeptember 30, 2021 , including those related to acquisitions, were$208 million . 7 Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant currency revenue growth are not measures of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information and reconciliations to the most directly comparable GAAP financial measures. Cognizant Technology Solutions 32 September 30, 2022 Form 10-Q
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Table of Contents
Revenues - Reportable Business Segments
The following charts set forth revenues and change in revenues by business
segment and geography for the nine months ended
Financial Services Health Sciences
Increase / (Decrease) Increase / (Decrease)
Dollars in millions Revenues $ % CC %8 Revenues $ % CC %8
North America $ 3,270 133 4.2 4.4 $ 3,617 223 6.6 6.6
United Kingdom 446 51 12.9 21.4 129 - - 8.2
Continental Europe 443 (122) (21.6) (13.9) 365 9 2.5 11.4
Europe - Total 889 (71) (7.4) 0.6 494 9 1.9 10.5
Rest of World 432 25 6.1 11.4 94 6 6.8 15.3
Total $ 4,591 87 1.9 4.2 $ 4,205 238 6.0 7.3
Products and Resources Communications, Media and Technology
Increase / (Decrease) Increase / (Decrease)
Dollars in millions Revenues $ % CC %8 Revenues $ % CC %8
North America $ 2,310 120 5.5 5.7 $ 1,649 229 16.1 16.2
United Kingdom 396 49 14.1 25.5 386 54 16.3 28.4
Continental Europe 431 51 13.4 26.3 103 (18) (14.9) (4.3)
Europe - Total 827 100 13.8 25.9 489 36 7.9 19.7
Rest of World 281 38 15.6 19.7 237 11 4.9 11.4
Total $ 3,418 258 8.2 11.4 $ 2,375 276 13.1 16.4
Financial Services - revenues increased 1.9%, or 4.2% on a constant currency basis8
[[Image Removed: ctsh-20220930_g22.jpg]]
Banking ê $19M
Insurance é $106M
Revenue growth reflects the growing demand for digital services among U.S.
regional banks, public sector clients in the United Kingdom and insurance
clients. The previously disclosed sale of the Samlink subsidiary, which was
completed on February 1, 2022 , negatively impacted revenue growth in this
segment by 170 basis points.8Revenues from clients added since September 30,
2021 were $46 million .
Health Sciences - revenues increased 6.0%, or 7.3% on a constant currency basis8
Effective in the second quarter of 2022, we combined the healthcare operating segment with the life sciences operating segment and renamed our Healthcare reportable segment to Health Sciences. See Note 11 to our unaudited consolidated financial statements for additional information.
Revenue growth was driven by increased demand for digital services among
pharmaceutical clients. Revenues from clients added since
[[Image Removed: ctsh-20220930_g23.jpg]]
é $238M
8 Constant currency revenue growth is not a measure of financial performance
prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more
information.
Cognizant Technology Solutions 33 September 30, 2022 Form 10-Q
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Products and Resources - revenues increased 8.2%, or 11.4% on a constant currency
basis9
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Manufacturing, Logistics, Energy and Utilities é $131M
Retail and Consumer Goods é $79M
Travel and Hospitality é $48M
Revenue growth in this segment was primarily driven by demand for our digital
services among automotive, logistics, consumer goods and travel and hospitality
clients. Revenue growth in this segment included approximately 250 basis points
related to recently completed acquisitions. Revenues from clients added since
September 30, 2021 were $58 million .9
Communications, Media and Technology - revenues increased 13.1%, or 16.4% on a constant
currency basis9
In 2022, we combined the communications and media operating segment with the technology operating segment. See Note 11 to our unaudited consolidated financial statements for additional information.
Revenues in this segment reflected growing demand from our technology clients for services related to digital content, primarily driven by the largest clients in this segment, as well as demand for personalized user experiences and data modernization. Revenues from clients added sinceSeptember 30, 2021 were$81 million . [[Image Removed: ctsh-20220930_g25.jpg]] é$276M
Revenues - Geographic Markets
Revenues of
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YTD 2022 as compared to YTD 2021 Increase / (Decrease)
(Dollars in millions) $ % CC %9
North America $ 705 7.0 7.1
United Kingdom 154 12.8 23.1
Continental Europe (80) (5.6) 4.0
Europe - Total 74 2.8 12.7
Rest of World 80 8.3 13.8
Total revenues $ 859 6.3 8.6
North America continues to be our largest market, representing 74.3% of total
revenues for the nine months ended September 30, 2022 . Outside of our North
America region, revenues were negatively impacted by foreign currency exchange
rate movements. Constant currency revenue growth in the United Kingdom was
strong among Financial Services clients, including certain public sector
clients, Products and Resources clients, and Communications, Media and
Technology clients. Constant currency revenue growth in the Continental Europe
region was driven by growth in the German market, which benefited from an
acquisition that closed in the first half of 2021 and strong demand from our
pharmaceutical clients, partially offset by a negative 530 basis points impact
from the previously disclosed sale of the Samlink subsidiary, which was
completed on February 1, 2022 . Constant currency revenue growth in the Rest of
World region was primarily driven by the Australian market, which benefited from
an acquisition that closed in the first half of 2021.
9 Constant currency revenue growth is not a measure of financial performance
prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more
information.
Cognizant Technology Solutions 34 September 30, 2022 Form 10-Q
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Cost of Revenues (Exclusive of Depreciation and Amortization Expense)
[[Image Removed: ctsh-20220930_g27.jpg]]
é $722M
é 1.3% as a % of revenues
¡ % of Revenues
Our cost of revenues consists primarily of salaries, incentive-based
compensation, stock-based compensation expense, employee benefits,
project-related immigration and travel for technical personnel, subcontracting
and equipment costs relating to revenues. The increase, as a percentage of
revenues, was due to higher compensation costs for delivery personnel (including
employees and subcontractors), partially offset by delivery efficiencies and the
depreciation of the Indian rupee against the U.S. dollar. Challenges attracting
and retaining highly qualified personnel have resulted and are likely to
continue to result in higher compensation costs.
SG&A Expenses (Exclusive of Depreciation and Amortization Expense)
SG&A expenses consist primarily of salaries, incentive-based compensation,
stock-based compensation expense, employee benefits, immigration, travel,
marketing, communications, management, finance, administrative and occupancy
costs. The decrease, as a percentage of revenues, was primarily due to economies
of scale that allowed us to leverage our cost structure over a larger
organization, the beneficial impact of foreign currency exchange rate movements
and the optimization of non-strategic SG&A expenses.
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ê $49M
ê 1.5% as a % of revenues
¡ % of Revenues
Depreciation and Amortization Expense
Depreciation and amortization expense decreased 0.5%, and by 0.2% as a
percentage of revenues, during the nine months ended
Operating Margin and Adjusted Operating Margin10- Overall
[[Image Removed: ctsh-20220930_g29.jpg]][[Image Removed: ctsh-20220930_g30.jpg]]
Our 2022 operating margin was positively impacted by economies of scale that allowed us to leverage our cost structure over a larger organization, delivery efficiencies and the depreciation of the Indian rupee against theU.S. dollar, partially offset by increased compensation costs for our delivery personnel (including employees and subcontractors). Our 2021 GAAP operating margin was negatively impacted by the Class Action Settlement Loss, which was excluded from our Adjusted Operating Margin10 in 2021. Net of the impact of the hedges, the depreciation of the Indian rupee contributed 61 basis points to the improvement in our operating margin for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 . Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against theU.S. dollar positively impacted our operating margin by approximately 93 basis points during the nine months endedSeptember 30, 2022 . The settlement of our cash flow hedges positively impacted our operating margin by 4 basis points during the nine months endedSeptember 30, 2022 and by 36 basis points during the 2021 period.
10 Adjusted Income from Operations and Adjusted Operating Margin are not measures of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
Cognizant Technology Solutions 35 September 30, 2022 Form 10-Q
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Segment Operating Profit
In 2022, we made certain changes to the internal measurement of segment
operating profits for the purpose of evaluating segment performance and resource
allocation. The primary reason for the change was to charge to the business
segments costs that are directly managed and controlled by them. Specifically,
segment operating profit now includes costs related to non-delivery personnel
that support consulting services, which were previously included in "unallocated
costs." We have reported 2022 segment operating profits using the new allocation
methodology and have recast the 2021 results to conform to the new methodology.
Segment operating profit and operating margin percentage were as follows:
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[[Image Removed: ctsh-20220930_g32.jpg]]
[[Image Removed: ctsh-20220930_g33.jpg]]
[[Image Removed: ctsh-20220930_g34.jpg]]
In 2022, segment operating margins benefited from delivery efficiencies and the
depreciation of the Indian rupee against the U.S. dollar offset by increased
compensation costs for delivery personnel (including employees and
subcontractors). The 2022 Health Sciences segment operating margin was
negatively affected by investments to support revenue growth and elevated
pricing pressure on non-digital services.
Total segment operating profit and margin were as follows for the nine months
ended September 30 :
(Dollars in millions) 2022 % of Revenues 2021 % of Revenues Increase
Total segment operating profit $ 4,365 29.9 $ 4,106 29.9 $ 259
Less: unallocated costs 2,083 2,012 71
Income from operations $ 2,282 15.6 $ 2,094 15.3 $ 188
Other Income (Expense), Net
The following table sets forth total other income (expense), net for the nine
months ended
Increase/
(in millions) 2022 2021 Decrease
Foreign currency exchange (losses) $ (97) $ (26) $ (71)
Gains on foreign exchange forward contracts not
designated as hedging instruments 96 7 89
Foreign currency exchange gains (losses), net (1) (19) 18
Interest income 32 23 9
Interest expense (11) (7) (4)
Other, net - (1) 1
Total other income (expense), net $ 20 The foreign currency exchange losses were attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries. The gains on foreign exchange forward contracts not designated as hedging instruments related to the realized and unrealized gains and losses on contracts entered into to offset our foreign currency exposures. The increase in interest income of$9 million was primarily attributable to higher interest rates in the current period. Cognizant Technology Solutions 36 September 30, 2022 Form 10-Q
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Provision for Income Taxes
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é $6M
¡ Effective Income Tax Rate ê 2.1%
The effective income tax rate in the nine months ended September 30, 2022
decreased as compared to the 2021 period primarily due to the recognition in the
third quarter of 2022 of an income tax benefit of $36 million related to a
specific uncertain tax position that was previously unrecognized in our
prior-year consolidated financial statements and higher discrete tax benefits
related to the impact of depreciation of the Indian rupee against the U.S.
dollar on our undistributed foreign earnings. See Note 6 to our unaudited
consolidated financial statements for additional information.
Net Income
The increase in net income was driven by higher income from operations and a lower effective income tax rate.
[[Image Removed: ctsh-20220930_g36.jpg]]
é $208M
¡ é 0.7% of Revenues
Non-GAAP Financial Measures
See "Three Months Ended
The following table presents a reconciliation of each non-GAAP financial measure
to the most comparable GAAP measure for the nine months ended
% of % of
(Dollars in millions, except per share amounts) 2022 Revenues 2021 Revenues
GAAP income from operations and operating margin $ 2,282 15.6 $ 2,094 15.3
Class Action Settlement Loss (1) - - 20 0.1
Adjusted Income from Operations and Adjusted
Operating Margin $ 2,282 15.6 $ 2,114 15.4
GAAP diluted EPS $ 3.40 $ 2.96
Effect of above adjustments, pre-tax - 0.04
Non-operating foreign currency exchange (gains)
losses, pre-tax (2) - 0.03
Tax effect of above adjustments (3) 0.07 (0.01)
Effect of recognition of income tax benefit related to an uncertain tax position (4)
(0.07) -
Adjusted Diluted EPS $ 3.40 $ 3.02
(1)During the three months ended September 30, 2021 , we recorded a Class Action
Settlement Loss in "Selling, general and administrative expenses" in our
unaudited consolidated financial statements. For further information, see "Note
15 - Commitments and Contingencies" in the notes to the consolidated financial
statements in our Annual Report on Form 10-K for the year ended December 31,
2021 .
(2)Non-operating foreign currency exchange gains and losses, inclusive of gains
and losses on related foreign exchange forward contracts not designated as
hedging instruments for accounting purposes, are reported in "Foreign currency
exchange gains (losses), net" in our unaudited consolidated statements of
operations.
(3)Presented below are the tax impacts of each of our non-GAAP adjustments to
pre-tax income:
Nine Months Ended
(in millions) September 30,
2022 2021
Non-GAAP income tax benefit (expense) related to:
Class Action Settlement Loss - 6
Foreign currency exchange gains and losses (35) (3)
Cognizant Technology Solutions 37 September 30, 2022 Form 10-Q
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(4)During the three months endedSeptember 30, 2022 , we recognized an income tax benefit of$36 million related to a specific uncertain tax position that was previously unrecognized in our prior-year consolidated financial statements. The recognition of the benefit in the third quarter of 2022 was based on management's reassessment regarding whether this unrecognized tax benefit met the more-likely-than-not threshold in light of the lapse in the statute of limitations as to a portion of such benefit. The effective tax rate related to non-operating foreign currency exchange gains and losses varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions. As such, the income tax effect of non-operating foreign currency exchange gains and losses shown in the above table may not appear proportionate to the net pre-tax foreign currency exchange gains and losses reported in our unaudited consolidated statements of operations.
Liquidity and Capital Resources
Our cash generated from operations has historically been the primary source of liquidity to fund operations and investments to grow our business. As ofSeptember 30, 2022 , we had cash, cash equivalents and short-term investments of$2,731 million and available capacity under our credit facilities of approximately$1,909 million . The following table provides a summary of cash flows for the nine months endedSeptember 30 : (in millions) 2022 2021 Increase / Decrease Net cash provided by (used in): Operating activities$ 1,866 $ 1,670 $ 196 Investing activities (28) (1,666) 1,638 Financing activities (1,508) (1,007) (501) Operating activities The increase in cash provided by operating activities for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was primarily driven by higher income from operations. We monitor turnover, aging and the collection of accounts receivable by client. Our DSO calculation includes receivables, net of allowance for doubtful accounts, and contract assets, reduced by the uncollected portion of deferred revenue. Our DSO was 74 days as ofSeptember 30, 2022 , 72 days as ofSeptember 30, 2021 , and 69 days as ofDecember 31, 2021 .
Investing activities
The decrease in cash used in investing activities for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was primarily driven by net maturities of investments in 2022 as compared to net purchases of investments in 2021 as well as payments for business combinations in 2021. Financing activities
The increase in cash used in financing activities for the nine months ended
The Credit Agreement provided for a$750 million Term Loan and a$1,750 million unsecured revolving credit facility, which were due to mature inNovember 2023 . As ofSeptember 30, 2022 , we had no outstanding balance on the revolving credit facility. InOctober 2022 , we completed a debt refinancing and entered into the New Credit Agreement with a commercial bank syndicate providing for a$650 million New Term Loan and a$1,850 million unsecured revolving credit facility, which are due to mature inOctober 2027 . The Credit Agreement was terminated upon the closing of the New Credit Agreement and the proceeds from the New Term Loan were used primarily to repay our outstanding Term Loan balance. We are required under the New Credit Agreement to make scheduled quarterly principal payments on the New Term Loan beginning in December 2023. See Note 5 to our unaudited consolidated financial statements. The New Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. The financial covenant is tested at the end of each fiscal quarter and requires us to maintain a Leverage Ratio not in excess of 3.50:1.00, or for a period of up to four quarters following certain material acquisitions, 3.75:1.00. Cognizant Technology Solutions 38 September 30, 2022 Form 10-Q
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InMarch 2022 , ourIndia subsidiary renewed its one-year13 billion Indian rupee ($159 million at theSeptember 30, 2022 exchange rate) working capital facility, which requires us to repay any balances drawn down within 90 days from the date of disbursement. There is a 1.0% prepayment penalty applicable to payments made within 30 days after disbursement. This working capital facility contains affirmative and negative covenants and may be renewed annually. As ofSeptember 30, 2022 , we have not borrowed funds under this facility.
Capital Allocation
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Acquisitions
Share Repurchases
Dividend payments
We review our capital allocation framework on an ongoing basis, considering our
financial performance and liquidity position, investments required to execute
our strategic plans and initiatives, acquisition opportunities, the economic
outlook, regulatory changes, the potential impacts of the COVID-19 pandemic and
other relevant factors. As these factors may change over time, the actual
amounts expended on stock repurchase activity, dividends, and acquisitions, if
any, during any particular period cannot be predicted and may fluctuate from
time to time. While we have not completed any acquisitions in 2022, our
longer-term capital allocation framework is unchanged.
Other Liquidity and Capital Resources Information
We seek to ensure that our worldwide cash is available in the locations in which it is needed. As part of ongoing liquidity assessments, we regularly monitor the mix of domestic and international cash flows and cash balances. We evaluate on an ongoing basis what portion of the non-U.S. cash, cash equivalents and short-term investments is needed locally to execute our strategic plans and what amount is available for repatriation back tothe United States . We expect operating cash flows, cash and short-term investment balances, together with the available capacity under our revolving credit facilities, to be sufficient to meet our operating requirements, including purchase commitments, making Tax Reform Act transition tax payments and servicing our debt for the next twelve months. The ability to expand and grow our business in accordance with current plans, make acquisitions, meet long-term capital requirements beyond a twelve-month period and execute our capital return plan will depend on many factors, including the rate, if any, at which cash flow increases, our ability and willingness to pay for acquisitions with capital stock and the availability of public and private debt, including the ability to extend the maturity or refinance our existing debt, and equity financing. We cannot be certain that additional financing, if required, will be available on terms and conditions acceptable to us, if at all. Commitments and Contingencies
See Note 10 to our unaudited consolidated financial statements. Critical Accounting Estimates
Management's discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. On an ongoing basis, we evaluate our estimates. The most significant estimates relate to the recognition of revenue and profits, including the application of the cost-to-cost method of measuring progress to completion for certain fixed-price contracts, income taxes, business combinations and valuation of goodwill and other long-lived assets. We base our estimates on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual amounts may differ from the estimates used in the preparation of the accompanying unaudited consolidated financial statements. For a discussion of our critical accounting estimates, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Our significant accounting policies are described in Note 1 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Cognizant Technology Solutions 39 September 30, 2022 Form 10-Q
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Table of Contents Recently Adopted and New Accounting Pronouncements There have been no changes in the information provided in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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 theSEC , 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 COVID-19 pandemic, 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 the invasion ofUkraine byRussia , and in particular in the markets in which our clients and operations are concentrated;
•the continuing impact of the COVID-19 pandemic, or other future pandemics, on our business, results of operations, liquidity and financial condition;
•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;
•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 achieve our profitability goals and maintain our capital return strategy;
•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;
•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 inthe 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, including the increased stakeholder emphasis on ESG matters;
•potential changes in tax laws, or in their interpretation or enforcement,
failure by us to adapt our corporate structure and intercompany arrangements to
achieve global tax efficiencies or adverse outcomes of tax audits,
investigations or proceedings;
Cognizant Technology Solutions 40 September 30, 2022 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
You are advised to consult any further disclosures we make on related subjects in the reports we file with theSEC , 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 endedDecember 31, 2021 . 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.
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