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 have become an
increasingly important part of our portfolio, aligning with our clients' focus
on becoming data-enabled, customer-centric and differentiated businesses. We are
focused on continued investment in four key areas of digital: IoT, AI,
experience-driven software engineering 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.
The global COVID-19 pandemic has caused and is continuing to cause significant
loss of life and interruption to the global economy, including the curtailment
of activities by businesses and consumers in much of the world as governments
and others seek to limit the spread of the disease. In response to COVID-19, we
have prioritized the safety and well-being of our employees, business continuity
for our clients, and supporting the efforts of governments around the world to
contain the spread of the virus. In light of our commitment to help our clients
as they navigate unprecedented business challenges while protecting the safety
of our employees, we have taken numerous steps, and may continue to take further
actions, to address the COVID-19 pandemic. We have been working closely with our
clients to support them as they implemented their contingency plans, helping
them access our services and solutions remotely. We also undertook a significant
effort to enable our employees to work from home by providing them with computer
and Internet accessibility equipment while seeking to maintain appropriate
security protocols. Despite these efforts, in the first half of 2020 we
experienced some delays in project fulfillment as delivery, particularly in
India and the Philippines, shifted to work-from-home in response to the
pandemic. Additionally, as a result of the ongoing pandemic, we experienced
reduced client demand, project deferrals, furloughs, and temporary rate
concessions, which adversely affected revenues across all of our business
segments in 2020. For the year ended December 31, 2020, we incurred $65 million
of costs in response to the COVID-19 pandemic, including certain costs incurred
to enable our employees to work remotely.
In 2020, we incurred costs related to the execution of our multi-year 2020 Fit
for Growth Plan aimed at accelerating revenue growth. This plan refined our
strategic focus and launched a series of measures to improve our operational and
commercial models and optimize our cost structure in order to partially fund
investments in key digital areas of IoT, AI, experience-driven software
engineering and cloud and advance our growth agenda. The 2020 Fit for Growth
Plan included our decision to exit certain content-related services that are not
in line with our strategic vision for the Company. The optimization measures
that were part of the 2020 Fit for Growth Plan resulted in total charges of $221
million, primarily related to severance and facility exit costs that are
expected to generate an annualized savings run rate, before anticipated
investments, of approximately $530 million in 2021. See   Note 4   to our
consolidated financial statements for additional information on these costs,
which are reported in the caption "Restructuring charges" in our consolidated
statements of operations. We do not expect to incur additional costs related to
this plan. The COVID-19 pandemic may adversely impact our ability to realize the
benefits of our strategy and various transformation initiatives, including the
2020 Fit for Growth Plan. See   Part I, Item 1A. Risk Factors  .
Our exit from certain content-related services negatively impacted our 2020
revenues by approximately $178 million within our Communications, Media and
Technology segment in North America.
On April 20, 2020, we announced a security incident involving a Maze ransomware
attack. As previously reported in our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2020, based on numerous remediation steps that have been
undertaken and our continued monitoring of our environment, we believe we have
contained the attack and eradicated remnants of the attacker activity from our
environment. The lost revenue and containment, investigation, remediation, legal
and other costs incurred due to the ransomware attack may exceed our insurance
policy limits or may not be covered by insurance at all. Other actual and
potential consequences include, but are not limited to, negative publicity,
reputational damage, lost trust with customers, regulatory enforcement action,
litigation that could result in financial judgments or the payment of settlement
amounts and disputes with insurance carriers concerning coverage.
In March 2020, the Indian parliament enacted the Budget of India, which
contained a number of provisions related to income tax, including a replacement
of the DDT, previously due from the dividend payer, with a tax payable by the
shareholder receiving the dividend. This provision reduced the tax rate
applicable to us for cash repatriated from India. Following this change, during
the first quarter of 2020, we limited our indefinite reinvestment assertion to
India earnings accumulated in prior
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years. In July 2020, the U.S. Treasury Department and the IRS released final
regulations, which became effective in September 2020, that reduced the tax
applicable on our accumulated Indian earnings upon repatriation. As a result,
during the third quarter of 2020, after a thorough analysis of the impact of
these changes in law on the cost of earnings repatriation and considering our
strategic decision to increase our investments to accelerate growth in various
international markets and expand our global delivery footprint, we reversed our
indefinite reinvestment assertion on Indian earnings accumulated in prior years
and recorded a $140 million Tax on Accumulated Indian Earnings. The recorded
income tax expense reflects the India withholding tax on unrepatriated Indian
earnings, which were $5.2 billion as of December 31, 2019, net of applicable
U.S. foreign tax credits. On October 28, 2020, our subsidiary in India remitted
a dividend of $2.1 billion, which resulted in a net payment of $2.0 billion to
its shareholders (non-Indian Cognizant entities), after payment of $106 million
of India withholding tax.
On October 27, 2020, a jury returned a verdict in our favor in the amount of
$854 million, including $570 million punitive damages, in our lawsuit with
Syntel, which was initiated in 2015. We expect Syntel to appeal the decision and
thus we will not record the gain in our financial statements until it becomes
realizable. For more information, see   Note 15   to our consolidated financial
statements.
In the fourth quarter of 2020, we made an offer to settle and exit a large
customer engagement in Financial Services in Continental Europe ("Proposed
Exit"). The offer includes, among other terms, a proposed payment and the
forgiveness of certain receivables. The 2020 impact of the Proposed Exit was a
reduction of revenues of $118 million and additional expenses of $33 million,
primarily related to the impairment of long-lived assets. The Proposed Exit
negatively impacted each of our GAAP and Adjusted Diluted EPS by $0.27 for the
year ended December 31, 2020. While the amounts recorded are based on our best
estimate of the expected terms of the exit, the negotiations are ongoing and, as
such, we may not reach an agreement or the final terms of the agreement that is
reached may materially differ from those contemplated in our accounting. In
either instance, there could be additional impacts to our statement of
operations, financial condition and our cash flows.
2020 Financial Results
The following table sets forth a summary of our financial results for the years
ended December 31, 2020 and 2019:
                                                                                                        Increase / Decrease
                                                             2020               2019                 $                     %
                                                                        (Dollars in millions, except per share data)
Revenues                                                $    16,652          $ 16,783          $      (131)                  (0.8)
Income from operations                                        2,114             2,453                 (339)                 (13.8)

Net income                                                    1,392             1,842                 (450)                 (24.4)
Diluted EPS                                                    2.57              3.29                (0.72)                 (21.9)
Other Financial Information1
Adjusted Income From Operations                               2,394             2,787                 (393)                 (14.1)
Adjusted Diluted EPS                                           3.42              3.99                (0.57)                 (14.3)


Our financial results were negatively impacted by our exit from certain
content-related services, the Proposed Exit, the ransomware attack and the
COVID-19 pandemic. We continue to experience pricing pressure within our core
portfolio of services as our clients optimize the cost of supporting their
legacy systems and operations. At the same time, clients are adopting and
integrating digital technologies and their demand for our digital services and
solutions has continued to increase since the beginning of the COVID-19 pandemic
as a result of increased demand for mobile workplace solutions, e-commerce,
automation and AI and cybersecurity services and solutions.

1 Adjusted Income From Operations and Adjusted Diluted EPS are not measurements 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.


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The following charts set forth revenues and change in revenues by business
segment and geography for the year ended December 31, 2020 compared to the year
ended December 31, 2019:
                                                                  Financial Services                                                                     Healthcare
                                                                           Increase / (Decrease)                                                              Increase / (Decrease)
Dollars in millions                      Revenues               $                    %                  CC %2                Revenues               $                    %                 CC %2
North America                         $     4,013             (124)                 (3.0)                (3.0)            $     4,181               34                  0.8                 0.8
United Kingdom                                463              (21)                 (4.3)                (4.7)                    157               27                 20.8                19.8
Continental Europe                            629              (99)                (13.6)               (14.0)                    434               93                 27.3                24.0
Europe - Total                              1,092             (120)                 (9.9)               (10.3)                    591              120                 25.5                22.9
Rest of World                                 516               (4)                 (0.8)                 2.0                      80                3                  3.9                 6.0
Total                                 $     5,621             (248)                 (4.2)                (4.0)            $     4,852              157                  3.3                 3.1

                                                                Products and Resources                                                     

Communications, Media and Technology


                                                                           Increase / (Decrease)                                                              Increase / (Decrease)
Dollars in millions                      Revenues               $                    %                  CC %2                Revenues               $                    %                 CC %2
North America                         $     2,650              (28)                 (1.0)                (1.0)            $     1,737              (27)                (1.5)               (1.5)
United Kingdom                                371               (9)                 (2.4)                (3.0)                    344               25                  7.8                 6.8
Continental Europe                            413              (40)                 (8.8)                (8.7)                    177                8                  4.7                 2.1
Europe - Total                                784              (49)                 (5.9)                (6.1)                    521               33                  6.8                 5.2
Rest of World                                 262                3                   1.2                  4.7                     225               28                 14.2                20.2
Total                                 $     3,696              (74)                 (2.0)                (1.7)            $     2,483               34                  1.4                 1.6


Across all our business segments and regions, revenues were negatively impacted
by the COVID-19 pandemic and the ransomware attack. Retail, consumer goods,
travel and hospitality clients within our Products and Resources segment as well
as communications and media clients in our Communications, Media and Technology
segment were particularly adversely affected by the pandemic. Revenues in our
Financial Services segment in our Continental Europe region were negatively
impacted by $118 million due to the Proposed Exit. Additionally, we continued to
see certain financial services and healthcare clients transition the support of
some of their legacy systems and operations in-house. Revenue growth among our
life sciences clients was driven by revenues from Zenith and increased demand
for our services among pharmaceutical companies while revenues from our
healthcare clients benefited from stronger software license sales. Our
manufacturing, logistics, energy and utilities clients within our Products and
Resources segment generated revenue growth due to our clients' continued
adoption and integration of digital technologies. Revenues among our technology
clients in our Communications, Media and Technology segment in the North America
region were negatively impacted by approximately $178 million due to our exit
from certain content-related services. We continue to see growing demand from
our technology clients for other more strategic digital content services.
Additionally, the year-over-year change in our revenues included 210 basis
points of benefit from our recently completed acquisitions, including
Collaborative Solutions, Zenith and Contino.
Our operating margin and Adjusted Operating Margin2 decreased to 12.7% and
14.4%, respectively, for the year ended December 31, 2020 from 14.6% and 16.6%,
respectively, for the year ended December 31, 2019. Our GAAP and Adjusted
Operating Margin2 were adversely impacted by higher incentive-based compensation
accrual rates, investments intended to drive organic and inorganic revenue
growth, the impact of the Proposed Exit, the decline in revenues brought on by
the COVID-19 pandemic and the impact of the ransomware attack on both revenues
and costs. These impacts were partially offset by a significant decrease in
travel and entertainment expenses due to the COVID-19 pandemic, the cost savings
generated as a result of the 2020 Fit for Growth Plan, lower immigration costs
and the depreciation of the Indian rupee against the U.S. dollar. In addition,
our 2019 GAAP operating margin included a 0.7% negative impact of the
incremental accrual in 2019 related to the India Defined Contribution Obligation
as discussed in   Note 15   to our consolidated financial statements, while our
2020 GAAP operating margin was negatively impacted by COVID-19 Charges.




2  Constant currency revenue growth (CC) and Adjusted Operating Margin are not
measurements of financial performance prepared in accordance with GAAP. See
"Non-GAAP Financial Measures" for more information and a reconciliation to the
most directly comparable GAAP financial measure, as applicable.
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Business Outlook
We have four strategic priorities as we seek to increase our commercial momentum
and accelerate growth. These strategic priorities are:
•Accelerating digital - growing our digital business organically and
inorganically;
•Globalizing Cognizant - growing our business in key international markets and
diversifying leadership, capabilities and delivery footprint;
•Repositioning our brand - improving our global brand recognition and becoming
better known as a global digital partner to the entire C-suite; and
•Increasing our relevance to our clients - leading with thought leadership and
capabilities to address clients' business needs.
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. As our clients seek to optimize the cost of
supporting their legacy systems and operations, our core portfolio of services
may be subject to pricing pressure and lower demand due to clients transitioning
certain work in-house. At the same time, clients continue to adopt and integrate
digital technologies and their demand for our digital operations services and
solutions has only increased since the beginning of the COVID-19 pandemic, as
demand for mobile workplace solutions, e-commerce, automation and AI and
cybersecurity services and solutions has grown.
Our 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, which could affect their demand
for our services. The COVID-19 pandemic may continue to negatively impact
demand, particularly among our retail, consumer goods, travel and hospitality
clients within our Products and Resources segment as well as communications and
media clients in our Communications, Media and Technology segment. The
significant and evolving nature of the COVID-19 pandemic makes it difficult to
estimate its future impact on our ongoing business, results of operations and
overall financial performance. See   Part I    , Item 1A. Risk Factors  .
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. Competition for skilled labor is intense
and 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 around the world. As such, we will continue to
focus on recruiting, talent management and employee engagement to attract and
retain our employees.
We will continue to pursue strategic acquisitions, investments and alliances
that will expand our talent, experience and capabilities in key digital areas or
in particular geographies or industries.
In addition, our future results may be affected by immigration law changes that
may impact our ability to do business or significantly increase our costs of
doing business, potential tax law changes and other potential regulatory
changes, including potentially increased costs in 2021 and future years for
employment and post-employment benefits in India as a result of the issuance of
the Code in late 2020, as well as costs related to the potential resolution of
legal and regulatory matters discussed in   Note 15   to our consolidated
financial statements. For additional information, see   Part I, Item 1A. Risk
Factors    .
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Results of Operations


For a discussion of our results of operations for the year ended December 31,
2018, including a year-to-year comparison between 2019 and 2018, refer to Part
II, Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report Form 10-K for the year ended
December 31, 2019.
The Year Ended December 31, 2020 Compared to The Year Ended December 31, 2019
The following table sets forth certain financial data for the years ended
December 31:
                                                                     % of                                % of                             Increase / Decrease
                                                 2020              Revenues            2019            Revenues                          $                   %
                                                                (Dollars in millions, except per share data)
Revenues                                    $     16,652             100.0          $ 16,783             100.0                      $    (131)               (0.8)
Cost of revenues(1)                               10,671             64.1             10,634             63.4                              37                 0.3
Selling, general and administrative
expenses(1)                                        3,100             18.6              2,972             17.7                             128                 4.3
Restructuring charges                                215              1.3                217              1.3                              (2)               (0.9)
Depreciation and amortization expense                552              3.3                507              3.0                              45                 8.9
Income from operations                             2,114             12.7              2,453             14.6                            (339)              (13.8)
Other income (expense), net                          (18)                                 90                                             (108)          

(120.0)


Income before provision for income
taxes                                              2,096             12.6              2,543             15.2                            (447)          

(17.6)


Provision for income taxes                          (704)                               (643)                                             (61)          

9.5


Income (loss) from equity method
investments                                            -                                 (58)                                              58              (100.0)
Net income                                  $      1,392              8.4           $  1,842             11.0                       $    (450)              (24.4)
Diluted EPS                                 $       2.57                            $   3.29                                        $   (0.72)              (21.9)
Other Financial Information 3
Adjusted Income From Operations and
Adjusted Operating Margin                   $      2,394             14.4           $  2,787             16.6                            (393)              (14.1)
Adjusted Diluted EPS                        $       3.42                            $   3.99                                        $   (0.57)              (14.3)




(1) Exclusive of depreciation and amortization expense.



Revenues - Overall
During 2020, revenues decreased by $131 million as compared to 2019,
representing a decline of 0.8%, or 0.7% on a constant currency basis3. Across
all business segments and regions, revenues were negatively impacted by the
ransomware attack and the COVID-19 pandemic. In addition, our exit from certain
content-related services and the Proposed Exit negatively impacted our revenues
by $178 million and $118 million, respectively. We continue to experience
pricing pressure within our core portfolio of services as our clients optimize
the cost of supporting their legacy systems and operations. At the same time,
clients are adopting and integrating digital technologies and their demand for
our digital services and solutions has continued to increase since the beginning
of the COVID-19 pandemic as a result of increased demand for mobile workplace
solutions, e-commerce, automation and AI and cybersecurity services and
solutions. Additionally, the year-over-year change in our revenues included 210
basis points of benefit from our recently completed acquisitions, including
Collaborative Solutions, Zenith and Contino. Revenues from clients added during
2020, including those related to acquisitions, were $342 million.






3  Adjusted Income From Operations, Adjusted Operating Margin, Adjusted Diluted
EPS and constant currency revenue growth are not measurements 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.
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Revenues - Reportable Business Segments
Revenues by reportable business segment were as follows:
                                                                                                                   Increase / (Decrease)
                                                             2020              2019            $            %                  CC%4
                                                                                     (Dollars in millions)

Financial Services                                        $  5,621          $  5,869                 $        (248)            (4.2)            (4.0)
Healthcare                                                   4,852             4,695                           157              3.3              3.1
Products and Resources                                       3,696             3,770                           (74)            (2.0)            (1.7)
Communications, Media and Technology                         2,483             2,449                            34              1.4              1.6
Total revenues                                            $ 16,652          $ 16,783                 $        (131)            (0.8)            (0.7)


Financial Services
Revenues from our Financial Services segment declined 4.2%, or 4.0% on a
constant currency basis4, in 2020. Revenues among our insurance clients
decreased by $85 million as compared to a decrease of $163 million from our
banking clients. The Proposed Exit negatively impacted our revenues from banking
clients by $118 million. Revenues from clients added during 2020, including
those related to acquisitions, were $70 million. Moderate revenue growth
generated by our digital services did not fully offset revenue declines
attributable to certain financial services clients who continued to transition
the support of some of their legacy systems and operations in-house.
Healthcare
Revenues from our Healthcare segment grew 3.3%, or 3.1% on a constant currency
basis4, in 2020. Revenues in this segment increased by $173 million among our
life science clients while revenues from our healthcare clients decreased $16
million. Revenue growth among our life sciences clients was driven by revenues
from Zenith and increased demand for our services among pharmaceutical
companies. Revenues from our healthcare clients were negatively impacted by the
establishment of an offshore captive by a large client, partially offset by the
2019 negative impact of a customer dispute with a healthcare client related to a
large volume based contract. Additionally, revenues from our healthcare clients
benefited from stronger software license sales in 2020. Revenues from clients
added during 2020, including those related to acquisitions, were $50 million.
Demand from our healthcare clients may continue to be affected by uncertainty in
the regulatory and political environment while demand from our life sciences
clients may be affected by industry consolidation.
Products and Resources
Revenues from our Products and Resources segment declined 2.0%, or 1.7% on a
constant currency basis4, in 2020. Retail, consumer goods, travel and
hospitality clients were particularly adversely affected by the COVID-19
pandemic. Thus, revenue from our travel and hospitality clients and from our
retail and consumer goods clients decreased by $126 million and $100 million,
respectively. Revenues from our manufacturing, logistics, energy and utilities
clients increased by $152 million due to our clients' adoption and integration
of digital technologies. Revenues from clients added during 2020, including
those related to acquisitions, were $105 million.
Communications, Media and Technology
Revenues from our Communications, Media and Technology segment grew 1.4%, or
1.6% on a constant currency basis4, in 2020. Revenues from our communications
and media clients increased $72 million while revenues from our technology
clients decreased $38 million. Revenues among our technology clients in this
segment were negatively impacted by approximately $178 million due to our exit
from certain content-related services. Additionally, revenues were negatively
impacted by the COVID-19 pandemic, particularly among our communications and
media clients, partially offset by growing demand from our technology clients
for other more strategic digital content services. Revenues from clients added
during 2020, including those related to acquisitions, were $117 million.

4 Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information.


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Revenues - Geographic Locations
Revenues by geographic market, as determined by client location, were as
follows:
                                                                                                                Increase / (Decrease)
                                                          2020              2019            $           %                 CC %5
                                                                                  (Dollars in millions)
North America                                          $ 12,581          $ 12,726                 $      (145)            (1.1)             (1.1) %
United Kingdom                                            1,335             1,313                          22              1.7               1.0  %
Continental Europe                                        1,653             1,691                         (38)            (2.2)             (3.3) %
Europe - Total                                            2,988             3,004                         (16)            (0.5)             (1.4) %
Rest of World                                             1,083             1,053                          30              2.8               6.4  %
Total revenues                                         $ 16,652          $ 16,783                 $      (131)            (0.8)             (0.7) %


North America continues to be our largest market, representing 75.6% of total
2020 revenues. Our North America region was negatively impacted by our exit from
certain content-related services in our Communications, Media and Technology
segment and the transition of the support of legacy systems for certain
financial services and healthcare clients in-house. Our Continental Europe
region was negatively impacted by the Proposed Exit, partially offset by growth
from our life sciences customers. Revenues in our United Kingdom region have
particularly benefited from our recently completed acquisitions. Revenue growth
in our Rest of World region was driven by our Communications, Media and
Technology clients.

Cost of Revenues (Exclusive of Depreciation and Amortization Expense)



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. Our cost of revenues increased by 0.3%
during 2020 as compared to 2019, increasing as a percentage of revenues to 64.1%
in 2020 compared to 63.4% in 2019. The increase in cost of revenues, as a
percentage of revenues, was due primarily to an increase in costs related to
higher incentive-based compensation accrual rates in 2020 and the impact of the
Proposed Exit, the COVID-19 pandemic and the ransomware attack. These impacts
were partially offset by a significant decrease in travel and entertainment
costs as a result of a reduction in travel due to the COVID-19 pandemic, the
cost savings generated as a result of our cost optimization strategy and the
depreciation of the Indian rupee against the U.S. dollar.
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. SG&A expenses increased by 4.3% during 2020 as compared to 2019,
increasing as a percentage of revenues to 18.6% in 2020 as compared to 17.7% in
2019. The increase, as a percentage of revenues, was due primarily to an
increase in costs related to higher incentive-based compensation accrual rates
in 2020, investments intended to drive organic and inorganic revenue growth and
the impacts of the COVID-19 pandemic, the Proposed Exit and the ransomware
attack. These negative impacts were partially offset by a significant decrease
in travel and entertainment costs as a result of a reduction in travel due to
the COVID-19 pandemic and lower immigration costs, in addition to the $117
million incremental accrual in 2019 related to the India Defined Contribution
Obligation as discussed in   Note 15   to our consolidated financial statements.
Restructuring Charges
Restructuring charges consist of our 2020 Fit for Growth Plan and our
realignment program. Restructuring charges were $215 million, or 1.3% as a
percentage of revenues during 2020, as compared to $217 million, or 1.3% as a
percentage of revenues, during 2019. For further detail on our restructuring
charges see   Note 4   to our consolidated financial statements.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by 8.9% during 2020 as compared
to 2019. The increase was due to procurement of additional computer equipment
primarily to provision work-from-home arrangements and amortization of
intangibles from recently completed acquisitions.


5 Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more information.


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Operating Margin - Overall
Our operating margin and Adjusted Operating Margin6 decreased to 12.7% and
14.4%, respectively, in 2020 from 14.6% and 16.6%, respectively, during 2019.
Our GAAP and Adjusted Operating Margin6 were adversely impacted by higher
incentive-based compensation accrual rates, investments intended to drive
organic and inorganic revenue growth, the impact of the Proposed Exit, the
decline in revenues brought on by the COVID-19 pandemic and the impact of the
ransomware attack on both revenues and costs. These impacts were partially
offset by a significant decrease in travel and entertainment expenses due to the
COVID-19 pandemic, the cost savings generated as a result of the 2020 Fit for
Growth Plan, lower immigration costs and the depreciation of the Indian rupee
against the U.S. dollar. In addition, our 2019 GAAP operating margin included a
0.7% negative impact of the incremental accrual in 2019 related to the India
Defined Contribution Obligation as discussed in   Note 15   to our consolidated
financial statements, while our 2020 GAAP operating margin was negatively
impacted by COVID-19 Charges.
Excluding the impact of applicable designated cash flow hedges, the depreciation
of the Indian rupee against the U.S. dollar positively impacted our operating
margin by approximately 92 basis points or 0.92 percentage points in 2020, while
in 2019 the depreciation of the Indian rupee against the U.S. dollar positively
impacted our operating margin by approximately 53 basis points or 0.53
percentage points. Each additional 1.0% change in exchange rate between the
Indian rupee and the U.S. dollar will have the effect of moving our operating
margin by approximately 17 basis points or 0.17 percentage points.
We enter into foreign exchange derivative contracts to hedge certain Indian
rupee denominated payments in India. These hedges are intended to mitigate the
volatility of the changes in the exchange rate between the U.S. dollar and the
Indian rupee. The impact of the settlement of our cash flow hedges was
immaterial in 2020 and 2019.
Our most significant costs are the salaries and related benefits for our
employees. These costs are affected by the impact of inflation. In certain
regions, competition for professionals with the advanced technical skills
necessary to perform our services has caused wages to increase at a rate greater
than the general rate of inflation.
We finished the year ended December 31, 2020 with approximately 289,500
employees, which is a decrease of 3,000 as compared to December 31, 2019. For
the three months ended December 31, 2020, annualized turnover, including both
voluntary and involuntary, was approximately 19.0%. Turnover for the years ended
December 31, 2020 and 2019, including both voluntary and involuntary, was
approximately 20.6% and 21.7%. Voluntary attrition normally constitutes the
significant majority of our attrition. In 2020, we saw elevated levels of
involuntary attrition due to our Fit for Growth Plan, including the exit from
certain content-related services. We also saw a decrease in voluntary attrition
from historic levels in the early stages of the COVID-19 pandemic. Both
voluntary and involuntary attrition are weighted towards our more junior
employees.
Segment Operating Profit and Margin
Segment operating profit and margin were as follows:
                                                                                                                                                            Increase
                                                       2020           Operating Margin %           2019           Operating Margin %                       /(Decrease)
                                                                                      (Dollars in millions)
Financial Services                                  $ 1,449                  25.8               $ 1,605                  27.3                           $         (156)
Healthcare                                            1,383                  28.5                 1,261                  26.9                                      122
Products and Resources                                1,078                  29.2                 1,028                  27.3                                       50
Communications, Media and Technology                    794                  32.0                   732                  29.9                                       62
Total segment operating profit and margin             4,704                  28.2                 4,626                  27.6                                       78
Less: unallocated costs                               2,590                                       2,173                                                            417
Income from operations                              $ 2,114                  12.7               $ 2,453                  14.6                           $         (339)


Across all our business segments, operating margins benefited from a significant
decrease in travel and entertainment costs due to COVID-19 related reductions in
travel, cost savings generated by our cost optimization initiatives and the
depreciation of the Indian rupee against the U.S. dollar, partially offset by
investments intended to drive organic and inorganic revenue growth and the
negative impact on revenues of the COVID-19 pandemic and the ransomware attack.
The 2020 operating margin in our Financial Services segment was negatively
impacted by the Proposed Exit. Additionally, the 2019 operating margin in our
Healthcare segment was negatively impacted by client mergers within the segment
and a dispute with a customer related to a large volume based contract. The
increase in unallocated costs in 2020 compared to 2019 is primarily due


6  Adjusted Operating Margin is not a measurement of financial performance
prepared in accordance with GAAP. See "Non-GAAP Financial Measures" for more
information and a reconciliation to the most directly comparable GAAP financial
measure.
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to a smaller shortfall in 2020 than in 2019 of incentive-based compensation as
compared to target, COVID-19 Charges and costs related to the ransomware attack,
partially offset by the 2019 India Defined Contribution Obligation discussed in
  Note 15   to our consolidated financial statements.
Other Income (Expense), Net
Total other income (expense), net consists primarily of foreign currency
exchange gains and losses, interest income and interest expense. The following
table sets forth total other income (expense), net for the years ended December
31:
                                                                                                       Increase /
                                                             2020               2019                    Decrease
                                                                       (in millions)
Foreign currency exchange (losses)                        $    (53)          $   (73)                $        20

(Losses) gains on foreign exchange forward contracts not designated as hedging instruments

                              (63)                8                         (71)
Foreign currency exchange (losses), net                       (116)              (65)                        (51)
Interest income                                                119               176                         (57)
Interest expense                                               (24)              (26)                          2
Other, net                                                       3                 5                          (2)
Total other income (expense), net                         $    (18)          $    90                 $      (108)


The foreign currency exchange gains and losses were primarily attributed to the
remeasurement of the Indian rupee denominated net monetary assets and
liabilities in our U.S. dollar functional currency India subsidiaries and, to a
lesser extent, the remeasurement of other net monetary assets and liabilities
denominated in currencies other than the functional currencies of our
subsidiaries. The gains and losses on our foreign exchange forward contracts not
designated as hedging instruments related to the realized and unrealized gains
and losses on foreign exchange forward contracts entered into to offset foreign
currency exposure to non-U.S. dollar denominated net monetary assets and
liabilities. As of December 31, 2020, the notional value of our undesignated
hedges was $637 million. The decrease in interest income of $57 million was
primarily attributable to lower yields in 2020.
Provision for Income Taxes
The provision for income taxes was $704 million in 2020 and $643 million in
2019. The effective income tax rate increased to 33.6% in 2020 as compared to
25.3% in 2019 primarily driven by the Tax on Accumulated Indian Earnings, the
impact of the Proposed Exit, which was not deductible for tax purposes, and the
depreciation of the Indian rupee against the U.S. dollar, which resulted in
non-deductible foreign currency exchange losses in our consolidated statement of
operations.
Income (loss) from equity method investments
In 2019, we recorded an impairment charge of $57 million on one of our equity
method investments as further described in   Note 5   to our consolidated
financial statements.
Net Income
Net income was $1,392 million in 2020 and $1,842 million in 2019. Net income as
a percentage of revenues decreased to 8.4% in 2020 from 11.0% in 2019. The
decrease in net income was driven by lower income from operations, higher
foreign currency exchange losses (inclusive of losses on our foreign exchange
forward contracts not designated as hedging instruments), lower interest income
and a higher provision for income taxes.
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 our non-GAAP financial
measures to the corresponding GAAP measures, set forth below, should be
carefully evaluated.

Our non-GAAP financial measures, Adjusted Operating Margin, Adjusted Income From
Operations and Adjusted Diluted EPS exclude unusual items. Additionally,
Adjusted Diluted EPS excludes 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 is calculated by applying the
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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 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 excluding certain costs provides a
meaningful supplemental measure for investors to evaluate our financial
performance. We believe that the presentation of our non-GAAP financial measures
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 do not
reflect all of the amounts associated with our operating results as determined
in accordance with GAAP and may exclude costs that are recurring such as our 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 our non-GAAP financial measures to
allow investors to evaluate such non-GAAP financial measures.
The following table presents a reconciliation of each non-GAAP financial measure
to the most comparable GAAP measure for the years ended December 31:
                                                                               % of                                     % of
                                                         2020                Revenues               2019              Revenues
                                                                     (Dollars in millions, except per share data)
GAAP income from operations and operating margin    $     2,114                   12.7  %        $ 2,453                   14.6  %
Realignment charges (1)                                      42                    0.3               169                    1.0
2020 Fit for Growth Plan restructuring charges (2)          173                    1.0                48                    0.3
COVID-19 Charges (3)                                         65                    0.4                 -                      -
Incremental accrual related to the India Defined
Contribution Obligation (4)                                   -                      -               117                    0.7
Adjusted Income From Operations and Adjusted
Operating Margin                                          2,394                   14.4             2,787                   16.6

GAAP diluted EPS                                    $      2.57                                  $  3.29
Effect of above adjustments, pre-tax                       0.52                                     0.60
Effect of non-operating foreign currency exchange
losses (gains), pre-tax (5)                                0.22                                     0.11
Tax effect of above adjustments (6)                       (0.15)                                   (0.15)
Tax on Accumulated Indian Earnings (7)                     0.26                                        -
Effect of the equity method investment impairment
(8)                                                           -                                     0.10
Effect of the India Tax Law (9)                               -                                     0.04
Adjusted Diluted EPS                                $      3.42                                  $  3.99

(1) As part of our realignment program, during 2020, we incurred employee retention costs and certain professional services fees and, during 2019, we incurred Executive Transition Costs, employee separation costs, employee retention costs and third party realignment costs. See Note 4 to our consolidated financial statements for additional information. (2) As part of our 2020 Fit for Growth plan, during 2020, we incurred certain employee separation, employee retention and facility exit costs and other charges and, during 2019, we incurred certain employee separation, employee retention and facility exit costs under the plan. See Note 4 to our consolidated financial statements for additional information.


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(3)  During 2020, we incurred costs in response to the COVID-19 pandemic
including a one-time bonus to our employees at the designation of associate and
below in both India and the Philippines, certain costs to enable our employees
to work remotely and provide medical staff and extra cleaning services for our
facilities. Most of the costs related to the pandemic are reported in "Cost of
revenues" in our consolidated statement of operations.
(4)  In 2019, we recorded an accrual of $117 million related to the India
Defined Contribution Obligation as further described in   Note 15   to our
consolidated financial statements.
(5)  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 consolidated statements of operations.
(6)  Presented below are the tax impacts of each of our non-GAAP adjustments to
pre-tax income:
                                                                For the years ended December 31,
                                                                  2020                     2019
                                                                         (in millions)
Non-GAAP income tax benefit (expense) related to:
Realignment charges                                        $             11          $          43
2020 Fit for Growth Plan restructuring charges                           45                     13
COVID-19 Charges                                                         17                      -
Incremental accrual related to the India Defined
Contribution Obligation                                                   -                     31
Foreign currency exchange gains and losses                                6                     (1)


(7)  In 2020, we reversed our indefinite reinvestment assertion on Indian
earnings accumulated in prior years and recorded $140 million in income tax
expense.
(8)  In 2019, we recorded an impairment charge of $57 million on one of our
equity investments as further described in   Note 5   to our consolidated
financial statements.
(9)  In 2019, we recorded a one-time net income tax expense of $21 million as a
result of the enactment of a new tax law in India.

Liquidity and Capital Resources




Cash generated from operations has historically been our primary source of
liquidity to fund operations and investments to grow our business. As of
December 31, 2020, we had cash, cash equivalents and short-term investments of
$2,724 million. Additionally, as of December 31, 2020, we had available capacity
under our credit facilities of approximately $1,928 million.
The following table provides a summary of our cash flows for the years ended
December 31:
                                         2020         2019              Increase / Decrease
                                              (in millions)
Net cash provided by (used in):
Operating activities                   $ 3,299      $ 2,499            $                800
Investing activities                    (1,238)       1,588                          (2,826)
Financing activities                    (2,009)      (2,569)                            560


Operating activities
The increase in cash generated from operating activities for 2020 compared to
2019 was primarily driven by improved collections on our trade accounts
receivable, deferrals of certain payments due to COVID-19 pandemic regulatory
relief provided by several jurisdictions in which we operate, and lower
incentive-based compensation payouts and cash taxes paid in 2020.
We monitor turnover, aging and the collection of trade accounts receivable by
client. Our DSO calculation includes trade accounts receivable, net of allowance
for doubtful accounts, and contract assets, reduced by the uncollected portion
of our deferred revenue. DSO was 70 days as of December 31, 2020 and 73 days as
of December 31, 2019.
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Investing activities
Net cash used in investing activities in 2020 was primarily driven by payments
for acquisitions. Net cash provided by investing activities in 2019 was driven
by net sales of investments partially offset by payments for acquisitions and
outflows for capital expenditures.
Financing activities
The decrease in cash used in financing activities in 2020 compared to 2019 is
primarily due to lower repurchases of common stock in 2020.
We have a Credit Agreement providing for a $750 million Term Loan and a $1,750
million unsecured revolving credit facility, which are due to mature in November
2023. We are required under the Credit Agreement to make scheduled quarterly
principal payments on the Term Loan. See   Note 10   to our consolidated
financial statements. During the first quarter of 2020, we borrowed $1.74
billion against our revolving credit facility and repaid this amount in full in
the fourth quarter of 2020. We believe that we currently meet all conditions set
forth in the Credit Agreement to borrow thereunder, and we are not aware of any
conditions that would prevent us from borrowing part or all of the remaining
available capacity under the revolving credit facility as of December 31, 2020
and through the date of this filing. As of December 31, 2020, we had no
outstanding balance on our revolving credit facility.
In February 2020, our India subsidiary renewed its one-year 13 billion Indian
rupee ($178 million at the December 31, 2020 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 of disbursement. This working capital facility
contains affirmative and negative covenants and may be renewed annually in
February. As of December 31, 2020, there was no balance outstanding under the
working capital facility.
During 2020, we returned $2,034 million to our stockholders through $1,554
million in share repurchases under our stock repurchase program and $480 million
in dividend payments. Our stock repurchase program, as amended by our Board of
Directors in December 2020, allows for the repurchase of an aggregate of up to
$9.5 billion, excluding fees and expenses, of our Class A common stock. As of
December 31, 2020, we have $2.8 billion, excluding fees and expenses, available
for repurchases under the program. Our shares outstanding decreased to 530
million as of December 31, 2020 from 548 million as of December 31, 2019. We
review our capital return plan on an on-going basis, considering the potential
impacts of COVID-19 pandemic, our financial performance and liquidity position,
investments required to execute our strategic plans and initiatives, acquisition
opportunities, the economic outlook, regulatory changes 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.
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 our ongoing liquidity assessments, we regularly monitor
the mix of our 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 to the United States.
In March 2020, the Indian parliament enacted the Budget of India, which
contained a number of provisions related to income tax, including a replacement
of the DDT, previously due from the dividend payer, with a tax payable by the
shareholder receiving the dividend. This provision reduced the tax rate
applicable to us for cash repatriated from India. Following this change, during
the first quarter of 2020, we limited our indefinite reinvestment assertion to
India earnings accumulated in prior years. In July 2020, the U.S. Treasury
Department and the IRS released final regulations, which became effective in
September 2020, that reduced the tax applicable on our accumulated Indian
earnings upon repatriation. As a result, during the third quarter of 2020, after
a thorough analysis of the impact of these changes in law on the cost of
earnings repatriation and considering our strategic decision to increase our
investments to accelerate growth in various international markets and expand our
global delivery footprint, we reversed our indefinite reinvestment assertion on
Indian earnings accumulated in prior years and recorded a $140 million Tax on
Accumulated Indian Earnings. The recorded income tax expense reflects the India
withholding tax on unrepatriated Indian earnings, which were $5.2 billion as of
December 31, 2019, net of applicable U.S. foreign tax credits. On October 28,
2020, our subsidiary in India remitted a dividend of $2.1 billion, which
resulted in a net payment of $2.0 billion to its shareholders (non-Indian
Cognizant entities), after payment of $106 million of India withholding tax.
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We expect our operating cash flows, cash and short-term investment balances,
together with our available capacity under our revolving credit facilities, to
be sufficient to meet our operating requirements and service our debt for the
next twelve months. Our ability to expand and grow our business in accordance
with current plans, make acquisitions, meet our 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 our cash flow increases, our
ability and willingness to pay for acquisitions with capital stock and the
availability of public and private 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

Commitments


As of December 31, 2020, we had the following obligations and commitments to
make future payments under contractual obligations and commercial commitments:
                                                            Payments due by period
                                                 Less than                                       More than
                                     Total         1 year        1-3 years       3-5 years        5 years
                                                                 (in millions)

Long-term debt obligations(1) $ 703 $ 38 $ 665

     $        -      $        -
Interest on long-term debt(2)           19               7              12               -               -
Finance lease obligations               23              11              11               1               -
Operating lease obligations          1,271             260             398             264             349
Other purchase commitments(3)          432             216             184              28               4
Tax Reform Act transition tax          478              50             145             283               -
Total                              $ 2,926      $      582      $    1,415      $      576      $      353





(1)  Consists of scheduled repayments of our Term Loan.
(2)  Interest on the Term Loan was calculated at interest rates in effect as of
December 31, 2020.
(3)  Other purchase commitments include, among other things, communications and
information technology obligations, as well as other obligations that we cannot
cancel or where we would be required to pay a termination fee in the event of
cancellation.

As of December 31, 2020, we had $193 million of unrecognized income tax
benefits. This represents the income tax benefits associated with certain income
tax positions on our U.S. and non-U.S. tax returns that have not been recognized
on our financial statements due to uncertainty regarding their resolution. The
resolution of these income tax positions with the relevant taxing authorities is
at various stages, and therefore we are unable to make a reliable estimate of
the eventual cash flows by period that may be required to settle these matters.
Contingencies
See   Note 15   to our consolidated financial statements for additional
information.

Off-Balance Sheet Arrangements

Other than our foreign exchange forward and option contracts, there were no off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons in 2020 and 2019 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates




Management's discussion and analysis of our financial condition and results of
operations is based on our accompanying consolidated financial statements that
have been prepared in accordance with GAAP. We base our estimates on historical
experience, current trends and on various other assumptions that are believed to
be relevant at the time our consolidated financial statements are prepared. We
evaluate our estimates on a continuous basis. However, the actual amounts may
differ from the estimates used in the preparation of our consolidated financial
statements.
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We believe the following accounting estimates are the most critical to aid in
fully understanding and evaluating our consolidated financial statements as they
require the most difficult, subjective or complex judgments, resulting from the
need to make estimates about the effect of matters that are inherently
uncertain. Changes to these estimates could have a material effect on our
results of operations and financial condition. Our significant accounting
policies are described in   Note 1   to our consolidated financial statements.
Revenue Recognition. Revenues related to fixed-price contracts for application
development and systems integration services, consulting or other technology
services are recognized as the service is performed using the cost to cost
method, under which the total value of revenues is recognized on the basis of
the percentage that each contract's total labor cost to date bears to the total
expected labor costs. Revenues related to fixed-price application maintenance,
testing and business process services are recognized using the cost to cost
method, if the right to invoice is not representative of the value being
delivered. The cost to cost method requires estimation of future costs, which is
updated as the project progresses to reflect the latest available information.
Such estimates and changes in estimates involve the use of judgment. The
cumulative impact of any revision in estimates is reflected in the financial
reporting period in which the change in estimate becomes known. Net changes in
estimates of such future costs and contract losses were immaterial to the
consolidated results of operations for the periods presented.
Income Taxes. Determining the consolidated provision for income tax expense,
deferred income tax assets (and related valuation allowance, if any) and
liabilities requires significant judgment. We are required to calculate and
provide for income taxes in each of the jurisdictions where we operate. Changes
in the geographic mix of income before taxes or estimated level of annual
pre-tax income can affect our overall effective income tax rate. In addition,
transactions between our affiliated entities are arranged in accordance with
applicable transfer pricing laws, regulations and relevant guidelines. As a
result, and due to the interpretive nature of certain aspects of these laws and
guidelines, we have pending applications for APAs before the taxing authorities
in some of our most significant jurisdictions. It could take years for the
relevant taxing authorities to negotiate and conclude these applications. The
consolidated provision for income taxes may change period to period based on
changes in facts and circumstances, such as settlements of income tax audits or
finalization of our applications for APAs.
Our provision for income taxes also includes the impact of reserves established
for uncertain income tax positions, as well as the related interest, which may
require us to apply judgment to complex issues and may require an extended
period of time to resolve. Although we believe we have adequately reserved for
our uncertain tax positions, no assurance can be given that the final outcome of
these matters will not differ from our recorded amounts. We adjust these
reserves in light of changing facts and circumstances, such as the closing of a
tax audit. To the extent that the final outcome of these matters differs from
the amounts recorded, such differences will impact the provision for income
taxes in the period in which such determination is made.
Business Combinations, Goodwill and Intangible Assets. Goodwill and intangible
assets, including indefinite-lived intangible assets, arise from the accounting
for business combinations. We account for business combinations using the
acquisition method which requires us to estimate the fair value of identifiable
assets acquired, liabilities assumed, including any contingent consideration,
and any noncontrolling interest in the acquiree to properly allocate purchase
price to the individual assets acquired and liabilities assumed. The allocation
of the purchase price utilizes estimates and assumptions in determining the fair
values of identifiable assets acquired and liabilities assumed, especially with
respect to intangible assets, including the timing and amount of forecasted
revenues and cash flows, anticipated growth rates, client attrition rates and
the discount rate reflecting the risk inherent in future cash flows.
We exercise judgment to allocate goodwill to the reporting units expected to
benefit from each business combination. Goodwill is tested for impairment at the
reporting unit level on an annual basis and between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying value. These events or
circumstances could include a significant change in the business climate,
regulatory environment, established business plans, operating performance
indicators or competition. Evaluation of goodwill for impairment requires
judgment, including the identification of reporting units, assignment of assets,
liabilities and goodwill to reporting units and determination of the fair value
of each reporting unit.
We estimate the fair value of our reporting units using a combination of an
income approach, utilizing a discounted cash flow analysis, and a market
approach, using market multiples. Under the income approach, we estimate
projected future cash flows, the timing of such cash flows and long-term growth
rates, and determine the appropriate discount rate that reflects the risk
inherent in the projected future cash flows. The discount rate used is based on
a market participant weighted-average cost of capital and may be adjusted for
the relevant risk associated with business-specific characteristics and the
uncertainty related to the reporting unit's ability to execute on the projected
future cash flows. Under the market approach, we estimate fair value based on
market multiples of revenues and earnings derived from comparable
publicly-traded companies with characteristics similar to the reporting unit.
The estimates used to calculate the fair value of a reporting unit change from
year to year based on
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We also evaluate indefinite-lived intangible assets for impairment at least
annually, or as circumstances warrant. Our 2020 qualitative assessment included
the review of relevant macroeconomic factors and entity-specific qualitative
factors to determine if it was more-likely-than-not that the fair value of our
indefinite-lived intangible assets was below carrying value.
Beginning with the first quarter of 2020, COVID-19 negatively affected all major
economic and financial markets and, although there is a wide range of possible
outcomes and the associated impact is highly dependent on variables that are
difficult to forecast, we deemed the deterioration in general economic
conditions sufficient to trigger an interim impairment testing of goodwill as of
March 31, 2020. Our interim test results as of March 31, 2020 indicated that the
fair values of all of our reporting units exceeded their carrying values and
thus, no impairment of goodwill existed as of March 31, 2020. Based on our most
recent evaluation of goodwill and indefinite-lived intangible assets performed
during the fourth quarter of 2020, we concluded that the goodwill and
indefinite-lived intangible asset balances in each of our reporting units were
not at risk of impairment.
We review our finite-lived assets, including our finite-lived intangible assets,
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset group may not be recoverable. We recognize an
impairment loss when the sum of the undiscounted expected future cash flows is
less than the carrying amount of such asset groups. The impairment loss is
determined as the amount by which the carrying amount of the asset group exceeds
its fair value. Assessing the fair value of asset groups involves significant
estimates and assumptions including estimation of future cash flows, the timing
of such cash flows and discount rates reflecting the risk inherent in future
cash flows.
Contingencies. Loss contingencies are recorded as liabilities when a loss is
considered probable and the amount can be reasonably estimated. When a material
loss contingency is reasonably possible but not probable, we do not record a
liability, but instead disclose the nature and amount of the claim, and an
estimate of the loss or range of loss, if such an estimate can be made.
Significant judgment is required in the determination of whether an exposure is
considered probable and reasonably estimable. Our judgments are subjective and
based on the information available from the status of the legal or regulatory
proceedings, the merits of our defenses and consultation with in-house and
outside legal counsel. As additional information becomes available, we reassess
any potential liability related to any pending litigation and may revise our
estimates. Such revisions in estimates of any potential liabilities could have a
material impact on our results of operations and financial position.

Recently Adopted and New Accounting Pronouncements

See Note 1 to our consolidated financial statements for additional information.



Forward Looking Statements



The statements contained in this Annual Report on Form 10-K 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 COVID-19 pandemic,
anticipated effective income tax rate and income tax expense, liquidity, access
to capital, capital return plan, investment strategies, cost management,
realignment program, 2020 Fit for Growth Plan, 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 regulatory and litigation matters, the incremental accrual related to
the India Defined Contribution Obligation, the Proposed Exit 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 and in particular in the markets in
which our clients and operations are concentrated;
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•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 to satisfy client demand and senior management to
lead our business globally;
•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 capital return strategy;
•our ability to successfully implement our 2020 Fit for Growth Plan and achieve
the anticipated benefits from the plan;
•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 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 associates 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 related to complying with the numerous and evolving legal and regulatory
requirements to which we are subject 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 to
achieve global tax efficiencies or adverse outcomes of tax audits,
investigations or proceedings;
•potential exposure to litigation and legal claims in the conduct of our
business; and
•the factors set forth in Part I, in the section entitled "  Item 1A. Risk
Factors  " in this report.
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 sections
titled "  Part I, Item 1. Business  ," "  Part I, Item 1A. Risk Factors  " and
"  Part II, Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations  ." 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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Glossary



Defined Term                  Definition
10b5-1 Plan                   Trading plan adopted pursuant to Rule 10b5-1 of the Exchange Act
                              Pamlico 10th Magnitude Blocker LLC, now known as Cognizant 10th
10th Magnitude                Magnitude Blocker, LLC
                              Cognizant Technology Solutions Corporation Amended and Restated 2009
2009 Incentive Plan           Incentive Compensation Plan
2017 Incentive Plan           Cognizant Technology Solutions Corporation 2017 Incentive Award Plan
Adjusted Diluted EPS          Adjusted diluted earnings per share
AI                            Artificial Intelligence
APA                           Advance Pricing Agreement
ASC                           Accounting Standards Codification
ASR                           Accelerated Stock Repurchase
ASU                           Accounting Standards Update
Bright Wolf                   Bright Wolf, LLC
Budget of India               Union Budget of India for 2020-2021
CC                            Constant Currency
Code                          The Code on Social Security, 2020
Code Zero                     Code Zero, LLC
Collaborative Solutions       Collaborative Solutions Holdings, LLC
Contino                       Contino Holdings Inc.
COVID-19                      The novel coronavirus disease
COVID-19 Charges              Costs directly related to the COVID-19 pandemic
CPI                           Consumer Price Index
                              Credit agreement with a commercial bank syndicate dated November 6,
Credit Agreement              2018
Credit Loss Standard          ASC Topic 326 "Financial Instruments - Credit Losses"
CTS India                     Our principal operating subsidiary in India
DDT                           Dividend Distribution Tax
D&I                           Diversity and Inclusion
Division Bench                Division Bench of the Madras High Court
DevOps                        Agile relationship between development and IT operations
DOJ                           United States Department of Justice
DSO                           Days Sales Outstanding
EI-Technologies               Entrepreneurs et Investisseurs Technologies SAS
EPS                           Earnings Per Share
ESG                           Environmental, social and corporate governance
EU                            European Union
Exchange Act                  Securities Exchange Act of 1934, as amended
                              Costs associated with our CEO transition and the departure of our
Executive Transition Costs    President in 2019
FASB                          Financial Accounting Standards Board
FCPA                          Foreign Corrupt Practices Act
                              Generally Accepted Accounting Principles in the United States of
GAAP                          America
High Court                    Madras High Court
HR                            Human Resources
Inawisdom                     Inawisdom Limited
India Defined Contribution    Certain statutory defined contribution obligations of employees and
Obligation                    employers in India


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                            New tax regime enacted by the Government of India effective April 1,
India Tax Law               2019
IP                          Intellectual property
IoT                         Internet of Things
IRS                         Internal Revenue Service
IT                          Information Technology
ITD                         Indian Income Tax Department
Lev                         Levementum, LLC
LIBOR                       London Inter-bank Offered Rate
Linium                      the ServiceNow business of Ness Digital Engineering
Magenic                     Magenic Technologies, Inc.
MAT                         Minimum Alternative Tax
Meritsoft                   Sterling Topco Limited
Mustache                    Mustache, LLC
New Revenue Standard        ASC Topic 606 "Revenue from Contracts with Customers"
New Lease Standard          ASC Topic 842 "Leases"
New Signature               BSI Corporate Holdings, Inc.
OECD                        Organization for Economic Co-operation and Development
                            Offer to settle and exit from a large customer engagement in Financial
Proposed Exit               Services in Continental Europe
PSU                         Performance Stock Units
                            Cognizant Technology Solutions Corporation 2004 Employee Stock Purchase
Purchase Plan               Plan, as amended
ROU                         Right of Use
RSU                         Restricted Stock Units
SaaS                        Software as a service
Samlink                     Oy Samlink Ab
SEC                         United States Securities and Exchange Commission
SCI                         Supreme Court of India
Servian                     SVN HoldCo Pty Limited
SEZ                         Special Economic Zone
SG&A                        Selling, general and administrative
SLP                         Special Leave Petition
Syntel                      Syntel Sterling Best Shores Mauritius Ltd.
Tax on Accumulated Indian   The income tax expense related to the reversal of our indefinite
Earnings                    reinvestment assertion on Indian earnings accumulated in prior years
Tax Reform Act              Tax Cuts and Jobs Act
Term Loan                   Unsecured term loan under the Credit Agreement
Tin Roof                    Tin Roof Software, LLC
                            The TriZetto Group, Inc., now known as Cognizant Technology Software
TriZetto                    Group, Inc.
Zenith                      Zenith Technologies Limited



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