Cognizant Technology Solutions Corporation (CTSH)

Get CTSH Alerts
*Delayed - data as of Jun. 17, 2019 12:38 ET  -  Find a broker to begin trading CTSH now
Industry: Technology
Community Rating:
View:    CTSH Real Time
Symbol List Views
FlashQuotes InfoQuotes
Stock Details
Summary Quote Real-Time Quote After Hours Quote Pre-market Quote Historical Quote Option Chain
Basic Chart Interactive Chart
Company Headlines Press Releases Market Stream
Analyst Research Guru Analysis Stock Report Competitors Stock Consultant Stock Comparison
Call Transcripts Annual Report Income Statement Revenue/EPS SEC Filings Short Interest Dividend History
Ownership Summary Institutional Holdings Insiders
(SEC Form 4)
 Save Stocks

Cognizant Technology Solutions (CTSH)

Q2 2014 Earnings Call

August 06, 2014 8:00 am ET


David Nelson - Vice President of Investor Relations and Treasurer

Francisco D'souza - Chief Executive Officer and Director

Gordon J. Coburn - President

Karen McLoughlin - Chief Financial Officer and Principal Accounting Officer


Tien-tsin Huang - JP Morgan Chase & Co, Research Division

Edward S. Caso - Wells Fargo Securities, LLC, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Darrin D. Peller - Barclays Capital, Research Division

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Steven Milunovich - UBS Investment Bank, Research Division

Moshe Katri - Cowen and Company, LLC, Research Division

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Charles Brennan - Crédit Suisse AG, Research Division

Brian L. Essex - Morgan Stanley, Research Division

Jason Kupferberg - Jefferies LLC, Research Division



Ladies and gentlemen, welcome to the Cognizant Technology Solutions Second Quarter 2014 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to David Nelson, Vice President, Investor Relations and Treasurer at Cognizant. Please go ahead, sir.

David Nelson

Thank you, and good morning, everyone. By now, you should have received a copy of the earnings release for the company's second quarter 2014 results. If you have not, a copy is available on our website, cognizant.com. The speakers we have on today's call are Francisco D'souza, Chief Executive Officer; Gordon Coburn, President; and Karen McLoughlin, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. I would now like to turn the call over to Francisco D'Souza. Please go ahead, Frank.

Francisco D'souza

Thank you, David, and good morning, everyone. Thanks for joining us today. I'll start the call today with the highlights of our second quarter results and our revised outlook for the rest of the year. I'll also take some time to put our results in the context of the broader industry trends that we're seeing, using as examples some significant transformational deals that have recently been awarded to us. I'll then pass the call on to Gordon to discuss our detailed operating results, and Karen will provide further details on our financial metrics and guidance.

For the second quarter, we delivered revenue of $2.52 billion, at the midpoint of our guidance range. Our non-GAAP operating margin, at 21%, was higher than our target range for the quarter and positions us well to absorb wage increases and promotions that take effect during the second half of the year. And in support of our continued confidence in the business, this morning, we announced an expansion of our existing share repurchase program to $2 billion. Karen will give you more details on this expansion shortly.

We delivered solid performance in the second quarter. But due to weaknesses in certain clients and longer-than-expected sale cycles for certain large integrated deals, we're adopting a more conservative stance for the remainder of the year and revising our revenue guidance to at least 14% for 2014 while maintaining our prior full year non-GAAP EPS of at least $2.54. More specifically, there are 2 main reasons for this revised guidance. First, as we've discussed with you in the past, we are seeing a trend in the market towards larger integrated deals. While these deals represent a strong source of revenue for Cognizant, certain deals took longer than expected to close, leading to delays in revenue ramp-up. And second, we continue to experience weakness in certain clients in North America and the U.K. that recently underwent leadership changes, a situation that we described to you last quarter. While we believe that our client relationships remain sound, we will not generate as much revenue in 2014 from some of these clients as we had previously expected. While I'm disappointed that our full year revenue growth will be below our prior expectations, we remain optimistic about the evolving market opportunity ahead of us.

I'd like to spend a few moments putting our results and outlook in the context of what we're seeing in the market, using some specific large important client situations as illustrations. We've spoken to you in past quarters about our clients' dual mandate to run better and run different. On one side of the dual mandate, our clients are under constant pressure to become more efficient in their current operations or to run better, and they continue to look to us to provide ever-greater levels of productivity in their core operations and legacy technology environments by combining multiple service areas, applying advanced automation and implementing best-in-class operations and Lean Six Sigma methodologies. Gordon will speak to you shortly about the details of 3 large deals of this nature that together represent approximately $3.5 billion in total contract value. The largest of these deals is with Health Net, a top 10 managed care organization in the U.S. We've signed a letter of intent with Health Net and expect to finalize the contract before the end of Q3. The Health Net deal alone represents around $2.7 billion in total contract value and is the single largest PCB deal in the history of Cognizant. This engagement builds on our long-standing relationship with Health Net for close to 10 years. Judging by our pipeline, we are seeing increased opportunity in these types of engagements and anticipate this to be a long-term trend. Winning and delivering these deals requires a broad range of integrated capabilities, in which we have been investing over many years: a strong consulting front end, solid client raising skills, deep domain knowledge and at-scale capabilities in technology and operations. And behind deals like these lies a deep sense of trust that our clients place in us, trust that comes from multiyear client relationships and deep levels of engagement within our clients' organizations.

Read the rest of this transcript for free on seekingalpha.com