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0001058290False00010582902022-07-272022-07-27

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 27, 2022
ctsh-20220727_g1.jpg
Cognizant Technology Solutions Corporation
(Exact Name of Registrant as Specified in Charter)
Delaware 0-24429 13-3728359
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
300 Frank W. Burr Blvd.
Teaneck, New Jersey 07666
(Address of Principal Executive Offices including Zip Code)
(201) 801-0233
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
☐
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).
☐
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
☐
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock,
$0.01 par value per share
 CTSH The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).                                        
Emerging growth company
☐
    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02.     Results of Operations and Financial Condition.
On July 27, 2022, Cognizant Technology Solutions Corporation (the “Company”), issued a press release to report the Company’s financial results for the quarter ended June 30, 2022. The full text of the press release and the infographic embedded in and part of such press release are attached to this current report on Form 8-K as Exhibits 99.1 and 99.2, respectively.*
Item 7.01.    Regulation FD Disclosure.
The Company’s investor presentation containing additional financial information for the quarter ended June 30, 2022 is attached to this current report on Form 8-K as Exhibit 99.3.*
Item 9.01.    Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
Description
99.1
99.2
99.3
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).
* The information in Item 2.02, Item 7.01, Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 of this current report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
By:
/s/ Jan Siegmund
Name:
 Jan Siegmund
Title:
Chief Financial Officer
 
Date: July 27, 2022


EX-99.1 2 exhibit9916302022.htm EX-99.1 Document

Exhibit 99.1
cognizant.jpg
COGNIZANT REPORTS SECOND QUARTER 2022 RESULTS

•Revenue of $4.9 billion grew 7.0% year-over-year, or 9.5% in constant currency1
•Operating Margin of 15.5%, up 30 basis points year-over-year
•Over $1.0 billion deployed on share repurchases and dividends year-to-date
•Operating cash flow of $528 million and free cash flow1 of $485 million
•Full-year 2022 revenue growth guidance 6.3% to 7.3%, or 8.5% to 9.5% in constant currency

TEANECK, N.J., July 27, 2022 - Cognizant (Nasdaq: CTSH), one of the world’s leading professional services companies, today announced its second quarter 2022 financial results.

“In a period of unprecedented labor market conditions characterized by elevated attrition and significant wage inflation, we focused on our client commitments and delivered balanced financial results in the second quarter” said Brian Humphries, Chief Executive Officer. “As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities.”

Q2 2022 Q2 2021
Revenue (in billions) $4.9    $4.6   
Y/Y Growth 7.0% 14.6%
Y/Y Growth CC1
 9.5  %  12.0  % 
GAAP and Adjusted Operating Margin1
 15.5  % 15.2  %
GAAP Diluted EPS $1.11  $0.97 
Adjusted Diluted EPS1
 $1.14  $0.99 

Second Quarter 2022 Performance by Business Segment

Financial Services revenue grew 2.7% year-over-year, or 5.1% in constant currency, driven by growth in U.S. regional banking clients, strength in the United Kingdom and solid performance within insurance. The sale of the Samlink subsidiary, which closed on February 1, 2022, negatively impacted segment revenue growth by approximately 190 basis points.

Health Sciences2 revenue grew 6.3% year-over-year, or 7.6% in constant currency. Growth was driven by digital services among pharmaceutical clients and sustained demand for integrated software solutions among our healthcare clients.

Products and Resources revenue grew 8.1% year-over-year, or 11.6% in constant currency, driven in part by strength among automotive, logistics, retail and consumer goods clients. Segment growth includes the benefit of acquisitions closed in Q2 2021.

Communications, Media and Technology revenue grew 16.1% year-over-year, or 19.5% in constant currency, driven by strength among digital native companies.
1 Constant currency ("CC") revenue growth, Adjusted Operating Margin, Adjusted Diluted Earnings Per Share ("Adjusted Diluted EPS") and free cash flow are not measures of financial performance prepared in accordance with GAAP. See “About Non-GAAP Financial Measures and Performance Metrics” for more information and, where applicable, reconciliations to the most directly comparable GAAP financial measures as well as more information about digital revenue at the end of this release.
2 Previously referred to as Healthcare.


Bookings
Q2 bookings declined 3% year-over-year. This resulted in trailing 12-month bookings of $23.2 billion, which represented a book-to-bill of approximately 1.2x.

Return of Capital to Shareholders

The Company repurchased 4.2 million shares for $300 million during the second quarter and 9.2 million shares for $744 million year-to-date under its share repurchase program. As of June 30, 2022, there was $1.4 billion remaining under the share repurchase authorization. On July 26, 2022, the Company declared a quarterly cash dividend of $0.27 per share for shareholders of record on August 19, 2022. This dividend is payable on August 30, 2022.

“During the quarter, we maintained a disciplined approach on pricing, while managing supply constraints and labor cost inflationary pressure. While quarterly bookings performance was below our expectations, our 1.2x book-to-bill supports our revenue growth outlook for 2022,” said Jan Siegmund, Chief Financial Officer. “We now expect to return approximately $1.8 billion to shareholders through share repurchases and dividends for the full year, which reflects the strength of our balance sheet and our near-term acquisition outlook.”

Third Quarter and Full Year 2022 Outlook

The Company provided the following guidance:
•Third quarter revenue is expected to be $4.98-$5.03 billion, or growth of 5.0%-6.0% (7.5%-8.5% in constant currency).
•Full-year 2022 revenue is expected to be $19.7-$19.9 billion, or growth of 6.3%-7.3% (8.5%-9.5% in constant currency).
•Full-year 2022 Adjusted Operating Margin3 is expected to expand 20 basis points to 30 basis points to 15.6% - 15.7%.3
•Full-year 2022 Adjusted Diluted EPS3 is expected to be in the range of $4.51-$4.57.

Conference Call

Cognizant will host a conference call on July 27, 2022, at 5:00 p.m. (Eastern) to discuss the Company’s second quarter 2022 results. To listen to the conference call, please dial (877) 810-9510 (domestic) or +1 (201) 493-6778 (international) and provide the following conference passcode: “Cognizant Call.”
The conference call will also be available live on the Investor Relations section of the Cognizant website at http://investors.cognizant.com. An earnings supplement will also be available on the Cognizant website at the time of the conference call.
For those who cannot access the live broadcast, a replay will be available. To listen to the replay, please dial (877) 660-6853 (domestically) or +1 (201) 612-7415 (internationally) and enter 13730594 beginning two hours after the end of the call until 11:59 p.m. (Eastern) on Wednesday, August 10, 2022. The replay will also be available at Cognizant’s website www.cognizant.com for 60 days following the call.
3 A full reconciliation of Adjusted Operating Margin and Adjusted Diluted EPS guidance to the corresponding GAAP measure on a forward-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reconciling information with respect to unusual items. See “About Non-GAAP Financial Measures and Performance Metrics” for more information and a reconciliation at the end of this release.


About Cognizant
Cognizant (Nasdaq: CTSH) engineers modern businesses. We help our clients modernize technology, reimagine processes and transform experiences so they can stay ahead in our fast-changing world. Together, we’re improving everyday life. See how at www.cognizant.com or @cognizant.
Forward-Looking Statements
This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. These statements include, but are not limited to, express or implied forward-looking statements relating to our expectations regarding the impact of the COVID-19 pandemic on our business, our strategy, competitive position and opportunities in the marketplace, investment in and growth of our business, the effectiveness of our recruiting and talent efforts and related costs, trends in demand for digital solutions and services, labor market trends, the anticipated amount of capital to be returned to shareholders and our anticipated financial performance. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the competitive and rapidly changing nature of the markets we compete in, the competitive marketplace for talent and its impact on employee recruitment and retention, legal, reputational and financial risks resulting from cyberattacks, the impact of and effectiveness of business continuity plans during the COVID-19 pandemic, risks related to the invasion of Ukraine by Russia, changes in the regulatory environment, including with respect to immigration and taxes, and the other factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes 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 law.
About Non-GAAP Financial Measures and Performance Metrics
To supplement our financial results presented in accordance with GAAP, this press release includes references to the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: Adjusted Operating Margin, Adjusted Diluted EPS, free cash flow, net cash and constant currency revenue growth. 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 should be carefully evaluated.
Our non-GAAP financial measures, Adjusted Operating Margin 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 statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Free cash flow is defined as cash flows from operating activities net of purchases of property and equipment. Net cash is defined as cash and cash equivalents and short-term investments less short-term and long-term debt. 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.


Management believes providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for our executive officers and for making comparisons of our operating results to those of our competitors. Accordingly, we believe that the presentation of our non-GAAP measures, which exclude certain costs, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.
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.
Bookings are defined as total contract value (or TCV) of new contracts, including new contract sales as well as renewals and expansions of existing contracts. Bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large contracts. Our book-to-bill ratio is defined as bookings for the trailing twelve months divided by revenue for the same period. Measuring bookings involves the use of estimates and judgments and there are no independent standards or requirements governing the calculation of bookings. The extent and timing of conversion of bookings to revenues may be impacted by, among other factors, the types of services and solutions sold, contract duration, the pace of client spending, actual volumes of services delivered as compared to the volumes anticipated at the time of sale, and contract modifications, including terminations, over the lifetime of a contract. The majority of our contracts are terminable by the client on short notice often without penalty, and some without notice. We do not update our bookings for subsequent terminations, reductions or foreign currency exchange rate fluctuations. Information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our reported revenues. However, management believes that it is a key indicator of potential future revenues and provides a useful indicator of the volume of our business over time.
We disclose digital revenue as management believes it provides additional insights into the Company’s business. Measuring digital revenue requires the use of estimates and judgement, there are no independent standards or requirements governing the calculation and our calculation may differ from the calculations underlying similar such metrics disclosed by other companies. In the first quarter of 2022, we modified our definition of digital revenue to reflect our latest assessment of digital skills, growth priorities and pricing initiatives. Under the updated definition, digital revenue as a percentage of total revenue was 46%, 47%, 49% and 49% for the first, second, third and fourth quarter of 2021, respectively, and 48% for full year 2021.
Investor Relations Contact: Media Contact:
Tyler Scott Jeff DeMarrais
VP, Investor Relations VP, Corporate Communications
 +1 551-220-8246  +1 475-223-2298
Tyler.Scott@cognizant.com Jeff.DeMarrais@cognizant.com
- tables to follow -



COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 (in millions, except per share data) Three Months Ended
June 30,		 Six Months Ended
June 30,
  2022 2021 2022 2021
Revenues $ 4,906  $ 4,585  $ 9,732  $ 8,986 
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below) 3,119  2,863  6,216  5,627 
Selling, general and administrative expenses 883  881  1,745  1,708 
Depreciation and amortization expense 144  145  287  286 
Income from operations 760  696  1,484  1,365 
Other income (expense), net:
Interest income 9  7  15  16 
Interest expense (3) (2) (5) (4)
Foreign currency exchange gains (losses), net (4) (7) (4) (16)
Other, net (1) —  —  (2)
Total other income (expense), net 1  (2) 6  (6)
Income before provision for income taxes 761  694  1,490  1,359 
Provision for income taxes (184) (184) (354) (344)
Income (loss) from equity method investment —  2  4  2 
Net income $ 577  $ 512  $ 1,140  $ 1,017 
Basic earnings per share $ 1.11  $ 0.97  $ 2.18  $ 1.93 
Diluted earnings per share $ 1.11  $ 0.97  $ 2.18  $ 1.92 
Weighted average number of common shares outstanding - Basic 520  527  522  528 
Dilutive effect of shares issuable under stock-based compensation plans 1  1  1  1 
Weighted average number of common shares outstanding - Diluted 521  528  523  529 



COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(in millions, except par values)
 June 30,
2022		 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 1,768  $ 1,792 
Short-term investments 552  927 
Trade accounts receivable, net 3,785  3,557 
Other current assets 918  1,066 
Total current assets 7,023  7,342 
Property and equipment, net 1,121  1,171 
Operating lease assets, net 907  933 
Goodwill 5,517  5,620 
Intangible assets, net 1,101  1,218 
Deferred income tax assets, net 473  404 
Long-term investments 443  463 
Other noncurrent assets 673  701 
Total assets $ 17,258  $ 17,852 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 357  $ 361 
Deferred revenue 408  403 
Short-term debt 38  38 
Operating lease liabilities 178  195 
Accrued expenses and other current liabilities 2,172  2,532 
Total current liabilities 3,153  3,529 
Deferred revenue, noncurrent 24  40 
Operating lease liabilities, noncurrent 747  783 
Deferred income tax liabilities, net 207  218 
Long-term debt 608  626 
Long-term income taxes payable 283  378 
Other noncurrent liabilities 286  287 
Total liabilities 5,308  5,861 
Stockholders’ equity:
Preferred stock, $0.10 par value, 15 shares authorized, none issued —  — 
Class A common stock, $0.01 par value, 1,000 shares authorized, 518 and 525 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
 5  5 
Additional paid-in capital 21  27 
Retained earnings 12,193  11,922 
Accumulated other comprehensive income (loss) (269) 37 
Total stockholders’ equity 11,950  11,991 
Total liabilities and stockholders’ equity $ 17,258  $ 17,852 




COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
 (dollars in millions, except per share amounts) Three Months Ended
June 30,		 Six Months Ended
June 30,		 Guidance
  2022 2021 2022 2021 Full Year 2022
GAAP diluted earnings per share $ 1.11  $ 0.97  $ 2.18  $ 1.92 
Non-operating foreign currency exchange (gains) losses, pre-tax(a)
 0.01  0.01  0.01  0.03  (a)
Tax effect of non-operating foreign currency exchange (gains) losses(b)
 0.02  0.01  0.04  0.01  (a)
Adjusted Diluted Earnings Per Share $ 1.14  $ 0.99  $ 2.23  $ 1.96 
$4.51 - $4.57
Notes:
(a)Non-operating foreign currency exchange gains and losses, inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency exchange gains (losses), net" in our unaudited consolidated statements of operations. Non-operating foreign currency exchange gains and losses are subject to high variability and low visibility and therefore cannot be provided on a forward-looking basis without unreasonable efforts.
(b)Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income for the three and six months ended June 30:
(in millions) Three Months Ended
June 30,		 Six Months Ended June 30,
2022 2021 2022 2021
Non-GAAP income tax benefit (expense) related to:
Foreign currency exchange gains and losses
 (14) (6) (20) (6)
The effective tax rate related to non-operating foreign currency exchange gains and losses varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions. As such, the income tax effect of non-operating foreign currency exchange gains and losses shown in the above table may not appear proportionate to the net pre-tax foreign currency exchange gains and losses reported in our unaudited consolidated statements of operations.

Reconciliations of net cash
(in millions)
 June 30, 2022 December 31, 2021
Cash and cash equivalents $ 1,768  $ 1,792 
Short-term investments 552  927 
Less:
Short-term debt 38  38 
Long-term debt 608  626 
Net cash $ 1,674  $ 2,055 

The above tables serve to reconcile the Non-GAAP financial measures to the most directly comparable GAAP measures. Refer to the “About Non-GAAP Financial Measures and Performance Metrics” section of our press release for further information on the use of these Non-GAAP measures.


COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Revenue by Business Segment and Geography
(Unaudited)
 (dollars in millions) Three Months Ended June 30, 2022
Year over Year
   $  % of total  % Change
Constant Currency % Change (a)
Revenues by Segment:
Financial Services (b)
 $ 1,542  31.4  % 2.7  % 5.1  %
Health Sciences 1,408  28.7  % 6.3  % 7.6  %
Products and Resources 1,140  23.2  % 8.1  % 11.6  %
Communications, Media and Technology 816  16.7  % 16.1  % 19.5  %
Total Revenues $ 4,906  7.0  % 9.5  %
Revenues by Geography:
North America $ 3,656  74.5  % 8.4  % 8.6  %
United Kingdom 458  9.3  % 13.6  % 24.7  %
Continental Europe (b)
 445  9.1  % (7.7) % 2.5  %
Europe - Total (b)
 903  18.4  % 2.0  % 12.6  %
Rest of World 347  7.1  % 5.8  % 11.2  %
Total Revenues $ 4,906  7.0  % 9.5  %
  Six Months Ended June 30, 2022
Year over Year
   $  % of total  % Change
Constant Currency % Change (a)
Revenues by Segment:
Financial Services (b)
 $ 3,070  31.5  % 3.7  % 5.5  %
Health Sciences 2,800  28.8  % 7.2  % 8.2  %
Products and Resources 2,270  23.3  % 10.6  % 13.2  %
Communications, Media and Technology 1,592  16.4  % 17.1  % 19.7  %
Total Revenues $ 9,732  8.3  % 10.2  %
Revenues by Geography:
North America $ 7,225  74.2  % 8.6  % 8.7  %
United Kingdom 911  9.4  % 17.9  % 25.5  %
Continental Europe (b)
 904  9.3  % (3.6) % 4.6  %
Europe - Total (b)
 1,815  18.7  % 6.1  % 14.0  %
Rest of World 692  7.1  % 11.6  % 16.3  %
Total Revenues $ 9,732  8.3  % 10.2  %

Notes:
(a)Constant currency revenue growth is not a measure of financial performance prepared in accordance with GAAP. See “About Non-GAAP Financial Measures and Performance Metrics” section of our press release for further information.
(b)The sale of the Samlink subsidiary, which was completed on February 1, 2022, negatively impacted revenue growth for the three months ended June 30, 2022 in Financial Services, Continental Europe and Europe-Total by 190 basis points, 600 basis points and 330 basis points, respectively. For the six months ended June 30, 2022, revenue growth was negatively impacted in Financial Services, Continental Europe and Europe-Total by 160 basis points, 510 basis points and 280 basis points, respectively.



COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(in millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
2022 2021 2022 2021
Cash flows from operating activities:
Net income $ 577  $ 512  $ 1,140  $ 1,017 
Adjustments for non-cash income and expenses 113  207  409  532 
Changes in assets and liabilities (162) (178) (715) (827)
Net cash provided by operating activities 528  541  834  722 
Cash flows from investing activities:
Purchases of property and equipment (43) (75) (163) (163)
Net (purchases) maturities of investments (428) (298) 373  (438)
Proceeds from sales of businesses —  —  19  — 
Payments for business combinations, net of cash acquired —  (348) —  (658)
Net cash (used in) provided by investing activities (471) (721) 229  (1,259)
Cash flows from financing activities:
Repurchases of common stock (318) (320) (792) (560)
Repayment of term loan borrowings and finance lease and earnout obligations (11) (13) (26) (28)
Dividends paid (141) (127) (284) (255)
Issuance of common stock under stock-based compensation plans 20  32  52  75 
Net cash (used in) financing activities (450) (428) (1,050) (768)
Effect of exchange rate changes on cash and cash equivalents (31) 3  (37) (7)
(Decrease) in cash and cash equivalents (424) (605) (24) (1,312)
Cash and cash equivalents, beginning of period 2,192  1,973  1,792  2,680 
Cash and cash equivalents, end of period $ 1,768  $ 1,368  $ 1,768  $ 1,368 

SUPPLEMENTAL CASH FLOW INFORMATION
(in millions) Three Months Ended
Stock Repurchases under Board of Directors' authorized stock repurchase program: June 30, 2022 June 30, 2021
Number of shares repurchased 4.2  4.0 
Remaining authorized balance as of June 30, 2022
 $ 1,375 


Reconciliation of Free Cash Flow Non-GAAP Financial Measure
(in millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
2022 2021 2022 2021
Net cash provided by operating activities $ 528  $ 541  $ 834  $ 722 
Purchases of property and equipment
 (43) (75) (163) (163)
Free cash flow $ 485  $ 466  $ 671  $ 559 


EX-99.2 3 exhibit99263022.htm EX-99.2 exhibit99263022
Q2 2022 In a period of unprecedented labor market conditions characterized by elevated attrition and significant wage inflation, we focused on our client commitments and delivered balanced financial results in the second quarter. As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities. Brian Humphries | Chief Executive Officer ” Revenue $4.9 billion Reported YoY é 7.0% Constant Currency YoY é 9.5% Digital revenue up ~13% year- over-year and represents 50% of total revenue GAAP and Adjusted Operating Margin | 15.5% GAAP EPS | $1.11 $3.7$0.9 $0.3 Rest of World 5.8% Revenue by Geography ($ In billions) Reported YoY | Constant Currency YoY Cash Flow Cash Flow From Operations $528M Free Cash Flow $485M Capital Return Q2 2022 Dividend $141M Q2 2022 Share Repurchases $318M $0.27/share Revenue by Segment ($ In billions) Reported YoY | Constant Currency YoY Europe North America 11.2% $1.6 $1.4 $1.1 $0.8 Products & Resources Health Sciences Financial Services Communications, Media & Technology 2.0% 12.6% 8.4% 8.6% 16.1% 19.5% 8.1% 11.6% 2.7% 5.1% 6.3% 7.6% Total Employees 341,300 Voluntary Annualized Attrition 31% ” Q2 2022 year-over-year revenue growth reflects the impact from the sale of the Samlink subsidiary. For more information on the impact from the sale of the Samlink subsidiary, digital revenue and for non-GAAP financial reconciliations refer to Cognizant's 2022 second quarter earnings release issued on July  27, 2022, which accompanies this presentation and is available at investors.cognizant.com. Exhibit 99.2 2021 ESG Report +900 QoQ +40,100 YoY Voluntary Trailing 12- Month Attrition 32%é é é é é é é é é é é é é é Adjusted Diluted EPS | $1.14

 
EX-99.3 4 exhibit99363022.htm EX-99.3 exhibit99363022
Exhibit 99.3 Second Quarter 2022 Financial Results and Highlights © 2022 Cognizant July 27, 2022

 
© 2022 Cognizant Forward-looking statements This earnings supplement includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. These statements include, but are not limited to, express or implied forward-looking statements relating to our expectations regarding the impact of the COVID-19 pandemic on our business, our strategy, competitive position and opportunities in the marketplace, investment in and growth of our business, the effectiveness of our recruiting and talent efforts and related costs, demand for digital solutions and services, labor market trends, the anticipated amount of capital to be returned to shareholders and our anticipated financial performance. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. Existing and prospective investors are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the competitive and rapidly changing nature of the markets we compete in, the competitive marketplace for talent and its impact on employee recruitment and retention, legal, reputational and financial risks resulting from cyberattacks, the impact of and effectiveness of business continuity plans during the COVID-19 pandemic, risks related to the invasion of Ukraine by Russia, changes in the regulatory environment, including with respect to immigration and taxes, and the other factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes 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 law. 2

 
© 2022 Cognizant Results Summary: Q2 2022 1 See “About Non-GAAP Financial Measures and Performance Metrics” at the end of this earnings supplement for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable. Revenue Up 7.0% Y/Y as reported, or 9.5% Y/Y in constant currency1 GAAP and Adjusted Operating Margin1 Cash Flow 3 $4,585M $4,906M Q2 '21 Q2 '22 Diluted Earnings Per Share (EPS) 15.2% 15.5% Q2 '21 Q2 '22 15.2% 15.5% Q2 '21 Q2 '22 $541M $528M Q2 '21 Q2 '22 $466M $485M Q2 '21 Q2 '22 $0.97 $1.11 Q2 '21 Q2 '22 $0.99 $1.14 Q2 '21 Q2 '22 Adjusted Operating Margin1 GAAP Diluted EPS Adjusted Diluted EPS1 Operating Cash Flow Free Cash Flow1

 
© 2022 Cognizant $4,225 $4,000 $4,243 $4,184 $4,401 $4,585 $4,744 $4,777 $4,826 $4,906 $0.96 $0.82 $0.97 $0.67 $0.97 $0.99 $1.06 $1.10 $1.08 $1.14 Revenue Adjusted Diluted EPS Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 $ in millions except per share amounts Q1 '20 Q2 '20 Q3 '20 Q4 '201 Q1 '21 Q2 '21 Q3 '21 Q4 '211 Q1 '22 Q2 '22 Y/Y 2.8% (3.4%) (0.1%) (2.3%) 4.2% 14.6% 11.8% 14.2% 9.7% 7.0% Y/Y CC 3.5% (2.5%) (0.7%) (3.0%) 2.4% 12.0% 11.0% 14.5% 10.9% 9.5% GAAP Operating Margin 13.7% 11.7% 14.2% 11.1% 15.2% 15.2% 15.4% 15.3% 15.0% 15.5% Adjusted Operating Margin 15.1% 14.1% 15.9% 12.3% 15.2% 15.2% 15.8% 15.3% 15.0% 15.5% GAAP Diluted EPS $0.67 $0.67 $0.64 $0.59 $0.95 $0.97 $1.03 $1.10 $1.07 $1.11 Adjusted Diluted EPS $0.96 $0.82 $0.97 $0.67 $0.97 $0.99 $1.06 $1.10 $1.08 $1.14 Revenue, Operating Margin and EPS Revenue Growth, Operating Margin and EPS 1 Samlink Impact on Q4 2020 was a reduction of revenue of $107 million, or -2.5 percentage points impact on Q4 2020 Y/Y growth. Q4 2021 revenue growth included +2.8 percentage points of Samlink Impact Y/Y. Q4 2020 Samlink Impact on GAAP / Adjusted Operating Margin was ~3.0 percentage points and $0.25 on GAAP / Adjusted Diluted EPS. 1 4 1

 
© 2022 Cognizant $3,656 $903 $347 $1,542 $1,408 $1,140 $816 Revenue Performance: Q2 2022 Products & Resources Communications, Media & Technology Health Sciences2 Financial Services1 North America Europe1 Rest of World Segments $ in millions Geography $ in millions +16.1% Y/Y +19.5% Y/Y CC +8.1% Y/Y +11.6% Y/Y CC +6.3% Y/Y +7.6% Y/Y CC +2.7% Y/Y +5.1% Y/Y CC +2.0% Y/Y +12.6% Y/Y CC +5.8% Y/Y +11.2% Y/Y CC +8.4% Y/Y +8.6% Y/Y CC 5 1 The sale of the Samlink subsidiary, which was completed on February 1, 2022, negatively impacted Y/Y revenue growth in Financial Services and Europe by 1.9 and 3.3 percentage points, respectively. 2 In Q2 2022, we renamed the Healthcare reportable segment as Health Sciences.

 
© 2022 Cognizant $1,104 $290 $148 Financial Services North America Europe1 Rest of World Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Y/Y 1.0% (5.2%) (1.5%) (11.1%) 0.5% 7.6% 5.1% 18.5% 4.8% 2.7% Y/Y CC 1.8% (4.3%) (2.2%) (11.4%) (1.7%) 4.8% 4.3% 18.8% 6.0% 5.1% +8.0% Y/Y +13.5% Y/Y CC (8.2%) Y/Y +0.3% Y/Y CC Revenue1 Revenue growth1 $ in millions $ in millions Q2 2022 Geography +5.2% Y/Y +5.5% Y/Y CC $1,451 $1,396 $1,469 $1,305 $1,458 $1,502 $1,544 $1,547 $1,528 $1,542 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 6 Growth was driven by U.S. regional banking clients, strength in the United Kingdom and solid performance within insurance. The sale of the Samlink subsidiary, closed on February 1, 2022, negatively impacted segment revenue growth by approximately 190 basis points. 1 Samlink Impact on Q4 2020 Financial Services was a reduction of revenue of $107 million, or -7.3 percentage points impact Y/Y. Q4 2021 Y/Y revenue growth included Samlink Impact of +9.0 percentage points on Financial Services. The sale of the Samlink subsidiary, which was completed on February 1, 2022, impacted our Q1 and Q2 2022 Y/Y revenue growth in total Financial Services by -1.3 and -1.9 percentage points, respectively, and Financial Services in Europe by -6.0 and -9.2 percentage points, respectively.

 
© 2022 Cognizant $1,210 $170 $28 Health Sciences North America Europe Rest of World (3.4%) Y/Y +4.8% Y/Y CC +3.0% Y/Y +12.3% Y/Y CC +7.0% Y/Y and CC Revenue $ in millions Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Y/Y 2.5% 2.0% 4.8% 4.0% 7.9% 14.5% 10.0% 7.9% 8.1% 6.3%Y/Y CC 2.7% 2.2% 4.2% 3.3% 7.0% 13.4% 9.8% 8.2% 8.8% 7.6% $1,194 $1,157 $1,231 $1,270 $1,288 $1,325 $1,354 $1,370 $1,392 $1,408 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 7 Revenue growth Growth was driven by digital services among pharmaceutical clients and sustained demand for integrated software solutions among our healthcare clients. $ in millions Q2 2022 Geography

 
© 2022 Cognizant $770 $277 $93 North America Europe Products & Resources +6.5% Y/Y +6.8% Y/Y CC +11.7% Y/Y +24.6% Y/Y CC +10.7% Y/Y +14.5% Y/Y CC Rest of World Revenue $ in millions Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Y/Y 4.4% (6.5%) (4.0%) (1.6%) 4.6% 21.7% 19.4% 17.7% 13.2% 8.1%Y/Y CC 5.3% (5.0%) (4.6%) (2.4%) 2.4% 17.8% 18.1% 18.0% 14.9% 11.6% $954 $867 $927 $948 $998 $1,055 $1,107 $1,116 $1,130 $1,140 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 8 Revenue growth Growth was driven in part by strength among automotive, logistics, retail and consumer goods clients. Segment growth includes the benefit of acquisitions closed in Q2 2021. $ in millions Q2 2022 Geography

 
© 2022 Cognizant $572 $166 $78$626 $580 $616 $661 $657 $703 $739 $744 $776 $816 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Communications, Media & Technology North America Rest of World —% Y/Y +6.0% Y/Y CC +6.4% Y/Y +18.6% Y/Y CC +22.0% Y/Y +22.1% Y/Y CC Europe Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Y/Y 5.2% (4.4%) 0.2% 4.6% 5.0% 21.2% 20.0% 12.6% 18.1% 16.1% Y/Y CC 6.3% (3.2%) (0.2%) 3.4% 3.1% 17.9% 19.1% 13.1% 19.9% 19.5% Impact from exit of certain content services ~(3.9%) ~(7.9%) ~(9.2%) ~(7.9%) ~(6.0%) ~(1.9%) N/A N/A N/A N/A 9 Revenue growth Revenue growth reflects continued strength among digital native companies. Revenue $ in millions $ in millions Q2 2022 Geography

 
© 2022 Cognizant $20.5 $21.7 $23.1 $23.4 $23.2 6/30/2021 9/30/2021 12/31/2021 03/31/2022 06/30/2022 Trailing Twelve Month Bookings 10 *In Q4 ‘21, we modified our definition of bookings to exclude overlap related to early renewals and include bookings related to unintegrated acquired entities. We cannot restate bookings for trailing twelve months (TTM) ended 6/30/2021 because bookings data for unintegrated acquired entities are not reasonably available for periods preceding Q4 ‘20. See “About Non- GAAP Financial Measures and Performance Metrics” for more information. Q2 quarterly bookings declined 3% year-over-year. This resulted in trailing twelve month bookings of $23.2 billion, which represented a book-to-bill of 1.2x. $ in billions *

 
© 2022 Cognizant Employee Metrics 291.7 281.2 283.1 289.5 296.5 301.2 318.4 330.6 340.4 341.3 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 11 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Trailing 12-Month Voluntary Attrition 17% 15% 13% 12% 13% 18% 24% 28% 29% 32% Quarterly Annualized Voluntary Attrition 13% 11% 10% 16% 18% 29% 33% 31% 26% 31% Quarterly Annualized Involuntary Attrition 9% 13% 8% 3% 3% 2% 4% 4% 5% 5% Additional Employee Metrics Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Offshore Utilization, Excluding Trainees 83% 80% 85% 87% 85% 84% 84% 83% 82% 83% Onsite Utilization 91% 91% 93% 91% 92% 92% 91% 90% 91% 91% Utilization Headcount in thousands

 
© 2022 Cognizant $480 $509 $538 $1,123 $970 $312 $1,621 $771 $1,003 FY 2020 FY 2021 Trailing 12-Months Acquisitions Share Repurchases $127 $127 $127 $143 $141 $348 $57 $255 $320 $129 $82 $474 $318 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Cash Flow, Balance Sheet & Capital Allocation Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Operating Cash Flow $497 $979 $925 $898 $181 $541 $948 $825 $306 $528 Free Cash Flow $385 $886 $821 $809 $93 $466 $897 $760 $186 $485 Cash and Short-Term Investments $4,282 $4,582 $4,575 $2,724 $2,158 $1,850 $2,413 $2,719 $2,319 $2,320 Total Debt $2,468 $2,459 $2,450 $701 $692 $683 $674 $664 $655 $646 Annual Quarterly Dividends 12 $ in millions $ in millions

 
© 2022 Cognizant FY 2022 Guidance1 1 Guidance is as of July 27, 2022 2 A full reconciliation of Adjusted Operating Margin, Adjusted Diluted EPS and Adjusted effective tax rate guidance to the corresponding GAAP measures on a forward-looking basis cannot be provided without unreasonable efforts as we are unable to provide reconciling information with respect to unusual items, net non-operating foreign currency exchange gains or losses, and the tax effects of these adjustments. See “About Non-GAAP Financial Measures” for more information, the definition of Adjusted effective tax rate and a partial reconciliation to the most directly comparable GAAP financial measure at the end of this earnings supplement. FY 2022 Guidance Assumptions Revenue $19.7 to $19.9B 6.3%-7.3% Y/Y or 8.5%-9.5% Y/Y CC Includes ~100 bps of inorganic contribution Adjusted Operating Margin2 15.6% to 15.7% 20-30bps of expansion vs. FY 2021 Interest Income ~$35M Adjusted effective tax rate2 24%-25% Share Count ~519M Adjusted Diluted EPS2 $4.51-$4.57 Q3 2022 Guidance Assumptions Revenue $4.98 to $5.03B 5.0%-6.0% Y/Y or 7.5%-8.5% Y/Y CC Includes ~50 bps of inorganic contribution 13

 
APPENDIX: About Non-GAAP Financial Measures and Performance Metrics

 
© 2022 Cognizant To supplement our financial results presented in accordance with GAAP, this earnings supplement includes references to the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: Adjusted Income From Operations, Adjusted Operating Margin, Adjusted Diluted EPS, free cash flow, Adjusted effective tax rate and constant currency revenue growth. 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 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 statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Free cash flow is defined as cash flows from operating activities net of purchases of property and equipment. 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. Adjusted effective tax rate reflects a tax rate commensurate with our non-GAAP Adjusted EPS. Management believes providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for our executive officers and for making comparisons of our operating results to those of our competitors. Accordingly, we believe that the presentation of our non-GAAP measures, which exclude certain costs, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations. 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. Bookings are defined as total contract value (or TCV) of new contracts, including new contract sales as well as renewals and expansions of existing contracts. In the fourth quarter of 2021, we modified our definition of bookings to exclude overlap related to early renewals and include bookings related to unintegrated acquired entities. We cannot restate bookings for the trailing twelve months ending 6/30/2021 because bookings data for unintegrated acquired entities are not reasonably available for periods preceding the fourth quarter of 2020. Bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large contracts. Our book-to-bill ratio is defined as bookings for the trailing twelve months divided by revenue for the same period. Measuring bookings involves the use of estimates and judgments and there are no independent standards or requirements governing the calculation of bookings. The extent and timing of conversion of bookings to revenues may be impacted by, among other factors, the types of services and solutions sold, contract duration, the pace of client spending, actual volumes of services delivered as compared to the volumes anticipated at the time of sale, and contract modifications, including terminations, over the lifetime of a contract. The majority of our contracts are terminable by the client on short notice often without penalty, and some without notice. We do not update our bookings for subsequent terminations, reductions or foreign currency exchange rate fluctuations. Information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our reported revenues. However, management believes that it is a key indicator of potential future revenues and provides a useful indicator of the volume of our business over time. About Non-GAAP Financial Measures and Performance Metrics 15

 
© 2022 Cognizant Reconciliations of Non-GAAP Financial Measures Please refer to page 17 and 18 of this earnings supplement for corresponding Non-GAAP notes. 16 (in millions, except per share amounts) Three Months Ended: Full Year Mar 31, 2020 Jun 30, 2020 Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Dec 31, 2021 Guidance Full Year 2022 GAAP income from operations $ 579 $ 467 $ 603 $ 465 $ 669 $ 696 $ 729 $ 732 $ 724 $ 760 $ 2,826 Class Action Settlement Loss(a) — — — — — — 20 — — — 20 Realignment charges(b) 20 12 8 2 — — — — — — — 2020 Fit for Growth Plan restructuring charges(c) 35 59 43 36 — — — — — — — COVID-19 charges(d) 6 25 21 13 — — — — — — — Adjusted income from operations $ 640 $ 563 $ 675 $ 516 $ 669 $ 696 $ 749 $ 732 $ 724 $ 760 $ 2,846 GAAP operating margin 13.7 % 11.7 % 14.2 % 11.1 % 15.2 % 15.2 % 15.4 % 15.3 % 15.0 % 15.5 % 15.3 % Class Action Settlement Loss — — — — — — 0.4 — — — 0.1 —% Realignment charges 0.5 0.3 0.2 — — — — — — — — — 2020 Fit for Growth Plan restructuring charges 0.8 1.5 1.0 0.9 — — — — — — — — COVID-19 charges 0.1 0.6 0.5 0.3 — — — — — — — — Adjusted operating margin 15.1 % 14.1 % 15.9 % 12.3 % 15.2 % 15.2 % 15.8 % 15.3 % 15.0 % 15.5 % 15.4 % 15.6% - 15.7% GAAP diluted earnings per share $ 0.67 $ 0.67 $ 0.64 $ 0.59 $ 0.95 $ 0.97 $ 1.03 $ 1.10 $ 1.07 $ 1.11 $ 4.05 Effect of above adjustments, pre-tax 0.11 0.18 0.13 0.10 — — 0.04 — — — 0.04 Effect of non-operating foreign currency exchange (gains) loss, pre-tax(e) 0.19 — — 0.02 0.02 0.01 0.01 — — 0.01 0.03 (e) Tax effect of above adjustments(f) (0.01) (0.03) (0.06) (0.04) — 0.01 (0.02) — 0.01 0.02 — (e) Tax on Accumulated Indian Earnings(g) — — 0.26 — — — — — — — — — Adjusted diluted earnings per share $ 0.96 $ 0.82 $ 0.97 $ 0.67 $ 0.97 $ 0.99 $ 1.06 $ 1.10 $ 1.08 $ 1.14 $ 4.12 $4.51 - $4.57

 
© 2022 Cognizant Reconciliations of Non-GAAP Financial Measures Notes: (a) During 2021, the parties to the consolidated putative securities class action suit filed a settlement agreement to resolve the consolidated putative securities class action against us and certain of our former officers. The settlement agreement provided for a payment of $95 million to the putative class (inclusive of attorneys’ fees and litigation expenses). Adjusting for indemnification expenses, legal fees and other covered expenses incurred through September 7, 2021, the remaining available balance under the applicable directors and officers insurance policies was $75 million. As a result, we recorded a Class Action Settlement Loss of $20 million in "Selling, general and administrative expenses" in our third quarter 2021 unaudited consolidated financial statements. (b) During 2020, we incurred realignment charges that consisted of employee separation costs, employee retention costs and professional fees. The total costs related to the realignment are reported in "Restructuring charges" in our unaudited consolidated statements of operations. (c) During 2020, we incurred restructuring charges as part of our 2020 Fit for Growth Plan that included employee separation costs, employee retention costs and facility exit costs and other charges. The total costs related to the 2020 Fit for Growth Plan are reported in "Restructuring charges" in our unaudited consolidated statements of operations. (d) 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 costs to 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 unaudited consolidated statement of operations. (e) Non-operating foreign currency exchange gains and losses, inclusive of gains and losses related to foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency exchange gains (losses), net" in our unaudited consolidated statements of operations. Non-operating foreign currency exchange gains and losses are subject to high variability and low visibility and therefore cannot be provided on a forward-looking basis without unreasonable efforts. 17 (f) Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income: Adjusted Effective Tax Rate Reconciliation Guidance FY 2021 FY 2022 GAAP effective tax rate 24.5 % Effect of adjustments to income from operations, pre-tax (0.2) Effect of non-operating foreign currency exchange (gains) losses, pre-tax (0.1) (e) Tax effect of above adjustments — (e) Adjusted effective tax rate 24.2 % 24%-25% 2020 2021 2022 FY Three months ended: Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 21 Tax impacts of non-GAAP adjustments: Class Action Settlement Loss $ — $ — $ — $ — $ — $ — $ 6 $ — $ — $ — $ 6 Realignment charges 5 3 2 1 — — — — — — — 2020 Fit for Growth restructuring charges 9 16 11 9 — — — — — — — COVID-19 charges 2 6 6 3 — — — — — — — Foreign currency exchange gain and losses (10) (8) 15 9 — (6) 3 (2) (6) (14) (5)

 
© 2022 Cognizant Reconciliations of Non-GAAP Financial Measures 18 (g) During the third quarter of 2020, after a thorough analysis of the impact of several changes in tax 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. Reconciliation of free cash flow Three Months Ended (in millions) Mar 31, 2020 Jun 30, 2020 Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Net cash provided by operating activities $ 497 $ 979 $ 925 $ 898 $ 181 $ 541 $ 948 $ 181 $ 306 $ 528 Purchases of property and equipment (112) (93) (104) (89) (88) (75) (51) (88) (120) (43) Free cash flow $ 385 $ 886 $ 821 $ 809 $ 93 $ 466 $ 897 $ 93 $ 186 $ 485