Cognizant(US:CTSH)2025-07-30 21:34PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2025, including statements of financial position, operations, comprehensive income, stockholders' equity, and cash flows, with detailed notes on accounting policies and financial data breakdowns Consolidated Statements of Financial Position Total assets increased to $20.16 billion by June 30, 2025, while total liabilities decreased to $4.88 billion, leading to a rise in total stockholders' equity to $15.29 billion Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $20,164 | $19,966 | | Cash and cash equivalents | $1,796 | $2,231 | | Goodwill | $7,120 | $6,953 | | Total Liabilities | $4,876 | $5,558 | | Long-term debt | $559 | $875 | | Accrued expenses and other current liabilities | $2,249 | $2,610 | | Total Stockholders' Equity | $15,288 | $14,408 | Consolidated Statements of Operations Q2 2025 revenues grew 8.1% to $5.25 billion with net income of $645 million, while six-month revenues reached $10.36 billion and net income $1.31 billion, with diluted EPS of $1.31 and $2.65 respectively Q2 and Six Months Ended June 30 - Financial Performance (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $5,245 | $4,850 | $10,360 | $9,610 | | Income from operations | $817 | $708 | $1,670 | $1,403 | | Net income | $645 | $566 | $1,308 | $1,112 | | Diluted EPS | $1.31 | $1.14 | $2.65 | $2.23 | Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $798 million for the six months ended June 30, 2025, while financing activities used $1.17 billion, resulting in cash and cash equivalents decreasing to $1.80 billion Six Months Ended June 30 - Cash Flow Summary (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $798 | $357 | | Net cash used in investing activities | $(89) | $(317) | | Net cash used in financing activities | $(1,173) | $(525) | | (Decrease) in cash and cash equivalents | $(435) | $(524) | | Cash and cash equivalents, end of period | $1,796 | $2,193 | Notes to Consolidated Financial Statements Detailed notes support the financial statements, covering revenue disaggregation, NextGen restructuring, debt, Indian tax disputes, OBBBA impact, derivatives, legal proceedings, and segment reporting changes - In Q1 2025, the company sold an office complex in India for $70 million, recording a gain of $62 million34 - The NextGen restructuring program was completed at the end of 2024, incurring no related costs in the first six months of 2025, compared to $52 million in the same period of 202444 - The company is involved in ongoing disputes with the Indian Income Tax Department (ITD) over share repurchase transactions from 2013 and 2016, maintaining it has paid all applicable taxes and has not recorded any reserves5559 - In Q1 2025, the company changed its internal measurement of segment operating profit to include an allocation of certain corporate costs for better reflection of full delivery costs, with prior period results recast for comparability98 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2025 financial performance, highlighting 8.1% Q2 revenue growth, improved operating margin, AI investment plans, and the OBBBA tax law's impact on tax expense and cash taxes, alongside liquidity and capital allocation Executive Summary & Business Outlook Q2 2025 revenue grew 8.1% to $5.2 billion, with GAAP operating margin increasing by 100 bps to 15.6%, while the company plans significant AI investments and anticipates a $400 million one-time non-cash tax expense from OBBBA Q2 2025 Financial Highlights vs. Q2 2024 | Metric | Change | Constant Currency Change | | :--- | :--- | :--- | | Revenue | +8.1% | +7.2% | | Income from Operations | +15.4% | N/A | | Operating Margin | +100 bps | N/A | | Diluted EPS | +14.9% | N/A | - The company plans to continue significant investments in AI capabilities to meet client needs and harness its value in a flexible, secure, and responsible way110 - The enactment of the OBBBA in July 2025 is anticipated to cause a one-time, non-cash tax expense of approximately $400 million in Q3 2025 but reduce cash taxes by $200 million in 2025111 Results of Operations Q2 2025 revenues increased 8.1% to $5.2 billion, driven by broad segment growth and the Belcan acquisition, while GAAP operating margin improved to 15.6% due to NextGen savings and efficiencies, with six-month revenues reaching $10.4 billion Q2 2025 vs Q2 2024 Revenue Growth by Segment | Segment | Revenue Growth ($M) | Growth % | Constant Currency % | | :--- | :--- | :--- | :--- | | Health Sciences | $90 | 6.2% | 5.3% | | Financial Services | $100 | 6.9% | 6.0% | | Products and Resources | $180 | 16.0% | 14.7% | | CMT | $25 | 3.1% | 2.2% | | Total | $395 | 8.1% | 7.2% | - The acquisition of Belcan contributed 400 basis points to overall revenue growth and approximately 1,600 basis points to the Products and Resources segment in Q2 2025116 - For the six months ended June 30, 2025, the company realized a gain of $62 million on the sale of an office complex in India, which positively impacted GAAP operating margin by 60 basis points159162 Liquidity and Capital Resources As of June 30, 2025, the company held $1.81 billion in cash and equivalents, with operating cash flow increasing to $798 million, primarily using cash for $577 million in stock repurchases and debt repayment, while DSO rose to 83 days Six Months Ended June 30 - Cash Flow Summary (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $798 | $357 | | Investing activities | $(89) | $(317) | | Financing activities | $(1,173) | $(525) | - Days Sales Outstanding (DSO) was 83 days as of June 30, 2025, an increase of 5 days from year-end 2024181 - Key capital allocation activities in the first half of 2025 included increased share repurchases and repayment of the outstanding balance under the revolving credit facility183 Quantitative and Qualitative Disclosures About Market Risk No material changes have occurred in the company's quantitative and qualitative disclosures about market risk since the Annual Report on Form 10-K for fiscal year 2024 - There have been no material changes in market risk disclosures since the last annual report195 Controls and Procedures As of June 30, 2025, the CEO and CFO concluded the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective196 - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025197 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 10 of the financial statements for details on legal proceedings, including claims related to Syntel, India Defined Contribution Obligation, and shareholder derivative lawsuits - For details on legal proceedings, the report refers to Note 10 of the financial statements200 Risk Factors No material changes have occurred in the company's risk factors since those disclosed in its Annual Report on Form 10-K for fiscal year 2024 - There have been no material changes in risk factors since the last annual report filed on February 12, 2025201 Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased approximately 4.5 million shares for $354 million, with $2.69 billion remaining available under its authorized stock repurchase program as of June 30, 2025 Q2 2025 Share Repurchases | Month (2025) | Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April | — | N/A | | May | 1,800,845 | $79.96 | | June | 2,654,094 | $79.11 | | Total | 4,454,939 | $79.45 | - As of June 30, 2025, the remaining authorized amount for share repurchases was $2,693 million202 Other Information During Q2 2025, no directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading plans during Q2 2025205