Cognizant Technology Solutions Corporation Net Income dropped on 24.4% and EBITDA Margin decreased slightly on 1.4 pp from 19.2% to 17.8%
02/03/2021 • About Cognizant Technology Solutions Corporation (
$CTSH) • By InTwits
Cognizant Technology Solutions Corporation reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Cognizant Technology Solutions Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 3.2%
- CAPEX is quite volatile: $8m in 2020, $4m in 2019, $3m in 2018, $3m in 2017, $2m in 2016
- The company has highly profitable business model: ROIC is 17.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased slightly on 0.78%. Revenue decline showed acceleration in 20Q4 - it was 2.3% YoY. Revenue decline was accelerating on average at -2.5 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.7 pp from 1.4% to 4.1% in 2020.
Gross Margin decreased slightly on 0.72 pp from 36.6% to 35.9% in 2020. Gross Margin declined at -0.95 pp per annum in 2016-2020. SG&A as a % of Revenue increased slightly on 0.91 pp from 17.7% to 18.6% in 2020.
Net Income margin decreased on 2.6 pp from 11.0% to 8.4% in 2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.4% in 2020. CAPEX/Revenue showed almost no change from 2017 to 2020. Average CAPEX/Revenue for the last three years was 2.4%.
Return on investment
The company operates at good ROIC (17.5%) and ROE (12.7%). ROIC decreased on 3.0 pp from 20.4% to 17.5% in 2020. ROE decreased on 3.7 pp from 16.4% to 12.7% in 2020. During 2016-2020 ROIC topped in 2018 at 23.8% and was declining since that time.
Leverage (Debt)
Debt level is -0.3x Net Debt / EBITDA and 0.6x Debt / EBITDA. Debt increased on 4.0% while cash increased slightly on 1.3%.
Cognizant Technology Solutions Corporation has no short term refinancing risk: cash is higher than short term debt (1,030.8%).
Valuation and dividends
Cognizant Technology Solutions Corporation's trades at EV/EBITDA 13.3x and P/E 29.0x.
Management team
The company's CEO Brian Humphries has spent 1 year with the company. Jan Siegmund is a Cognizant Technology Solutions Corporation's CFO. Jan Siegmund has spent 6 months years at the company.
Financial and operational results
FY ended 12/31/2020
Cognizant Technology Solutions Corporation ($CTSH) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 13,487 | 14,810 | 16,125 | 16,783 | 16,652 | -0.8% |
| Gross Profit | 5,379 | 5,658 | 6,287 | 6,149 | 5,981 | -2.7% |
| SG&A | 2,731 | 2,769 | 3,026 | 2,972 | 3,100 | 4.3% |
| EBITDA | 2,668 | 2,924 | 3,299 | 3,225 | 2,961 | -8.2% |
| EBIT | 2,289 | 2,481 | 2,801 | | | |
| Interest expence | 19 | 23 | 27 | | | |
| Tax | 805 | 1,153 | 698 | | | |
| Net Income | 1,553 | 1,504 | 2,101 | 1,842 | 1,392 | -24.4% |
| Stock Based Compensation | 217 | 221 | 267 | | | |
Balance Sheet
|
|---|
| Cash | 2,034 | 1,925 | 1,161 | 2,645 | 2,680 | 1.3% |
| Accounts Receivable | 2,556 | 2,865 | 3,257 | | | |
| Accounts Payable | 175 | 210 | 215 | | | |
| Short Term Debt | 81 | 175 | 9 | 251 | 260 | 3.6% |
| Long Term Debt | 797 | 698 | 736 | 1,460 | 1,520 | 4.1% |
Cash flow
|
|---|
| Capex | 300 | 284 | 377 | 392 | 398 | 1.5% |
| Dividends | | 265 | 468 | | | |
| Acquisitions | 334 | 216 | 1,111 | | | |
Ratios
|
|---|
| Revenue growth | 8.6% | 9.8% | 8.9% | 4.1% | -0.8% | |
| EBITDA growth | 7.9% | 9.6% | 12.8% | -2.2% | -8.2% | |
|
|---|
| Gross Margin | 39.9% | 38.2% | 39.0% | 36.6% | 35.9% | -0.7% |
| EBITDA Margin | 19.8% | 19.7% | 20.5% | 19.2% | 17.8% | -1.4% |
| EBIT Margin | 17.0% | 16.8% | 17.4% | | |
| SG&A, % of revenue | 20.2% | 18.7% | 18.8% | 17.7% | 18.6% | 0.9% |
| SBC, % of revenue | 1.6% | 1.5% | 1.7% | | |
| Net Income Margin | 11.5% | 10.2% | 13.0% | 11.0% | 8.4% | -2.6% |
| CAPEX, % of revenue | 2.2% | 1.9% | 2.3% | 2.3% | 2.4% | 0.1% |
|
|---|
| ROIC | 21.3% | 21.9% | 23.8% | 20.4% | 17.5% | -3.0% |
| ROE | 15.5% | 14.1% | 19.0% | 16.4% | 12.7% | -3.7% |
| Net Debt/EBITDA | -0.4x | -0.4x | -0.1x | -0.3x | -0.3x | -0.0x |
| Interest expence / Average debt | 2.2% | 2.6% | 3.3% | | | |
People
|
|---|
| Insider ownership | 0.3% | 0.3% | 0.3% | | | |
| Employees | 260,200 | 260,000 | 281,600 | | | |
| Revenue/Employee, th. $ | 52 | 57 | 57 | | | |
Cognizant Technology Solutions Corporation ($CTSH) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 4,225 | 4,000 | 4,243 | 4,184 | | 2.8% | -3.4% | -0.1% | -2.3% |
| EBITDA | 715 | 604 | 741 | 613 | | 6.4% | -26.0% | -26.0% | -25.1% |
| Net Income | 367 | 361 | 348 | 316 | | -16.8% | -29.1% | -30.0% | -20.0% |
Balance Sheet
|
|---|
| Cash | 3,886 | 4,422 | 4,436 | 2,680 | | 309.1% | 166.4% | 89.3% | 1.3% |
| Short Term Debt | 235 | 244 | 251 | 260 | | 8.8% | 1.2% | 3.3% | 3.6% |
| Long Term Debt | 3,164 | 3,223 | 3,232 | 1,520 | | 126.8% | 128.1% | 121.8% | 4.1% |
Ratios
|
|---|
| Gross Margin | 35.0% | 34.6% | 37.6% | 36.4% | | -2.4% | -1.9% | 0.7% | 0.5% |
| EBITDA Margin | 16.9% | 15.1% | 17.5% | 14.7% | | 0.6% | -4.6% | -6.1% | -4.4% |
| Net Income Margin | 8.7% | 9.0% | 8.2% | 7.6% | | -2.0% | -3.3% | -3.5% | -1.7% |
Peers in IT Consulting & Other Services
Below you can find Cognizant Technology Solutions Corporation benchmarking vs. other companies in IT Consulting & Other Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CLPS Incorporation ($CLPS) | - | 8.1% | 56.0% | 32.7% | 37.7% |
| Endava plc ($DAVA) | - | 38.1% | 36.5% | 32.3% | 21.9% |
| EPAM Systems, Inc. ($EPAM) | - | 25.0% | 27.1% | 24.5% | 15.9% |
| Switch, Inc. ($SWCH) | - | 18.8% | 7.3% | 13.9% | 10.7% |
| Perficient, Inc. ($PRFT) | - | -0.4% | 2.7% | 13.5% | 8.2% |
| |
|---|
| Median (14 companies) | 8.3% | 3.9% | 3.6% | 7.6% | 2.3% |
|---|
| Cognizant Technology Solutions Corporation ($CTSH) | - | 9.8% | 8.9% | 4.1% | -0.8% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Gartner, Inc. ($IT) | 61.3% | 60.1% | 63.1% | 63.5% | 67.2% |
| Teradata Corporation ($TDC) | 51.2% | 47.5% | 47.4% | 50.3% | 55.5% |
| Switch, Inc. ($SWCH) | 47.0% | 47.6% | 44.7% | 47.5% | 45.4% |
| Perficient, Inc. ($PRFT) | 31.1% | 33.3% | 35.8% | 37.4% | 37.8% |
| EPAM Systems, Inc. ($EPAM) | 36.5% | 36.5% | 35.6% | 35.1% | 34.9% |
| |
|---|
| Median (14 companies) | 28.8% | 28.8% | 29.4% | 35.1% | 32.7% |
|---|
| Cognizant Technology Solutions Corporation ($CTSH) | 39.9% | 38.2% | 39.0% | 36.6% | 35.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 37.0% | 28.5% | 39.8% | 44.1% | 47.8% |
| Amdocs Limited ($DOX) | 18.7% | 18.9% | 16.1% | 19.0% | 21.2% |
| Gartner, Inc. ($IT) | 15.0% | 7.1% | 13.0% | 16.2% | 19.8% |
| EPAM Systems, Inc. ($EPAM) | 13.5% | 13.9% | 15.3% | 17.9% | 19.4% |
| Accenture plc ($ACN) | 15.9% | 14.8% | 16.3% | 16.7% | 18.7% |
| |
|---|
| Median (14 companies) | 6.7% | 6.9% | 7.2% | 13.9% | 11.7% |
|---|
| Cognizant Technology Solutions Corporation ($CTSH) | 19.8% | 19.7% | 20.5% | 19.2% | 17.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 90.2% | 106.4% | 67.9% | 66.6% | 67.8% |
| Amdocs Limited ($DOX) | 3.5% | 3.4% | 5.8% | 3.1% | 4.9% |
| ServiceSource International, Inc. ($SREV) | 10.4% | 7.2% | 6.5% | 4.7% | 4.0% |
| Endava plc ($DAVA) | 2.4% | 4.1% | 2.5% | 2.6% | 2.8% |
| EPAM Systems, Inc. ($EPAM) | 2.5% | 2.1% | 2.0% | 4.3% | 2.6% |
| |
|---|
| Median (14 companies) | 1.1% | 1.4% | 1.5% | 2.1% | 1.7% |
|---|
| Cognizant Technology Solutions Corporation ($CTSH) | 2.2% | 1.9% | 2.3% | 2.3% | 2.4% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Accenture plc ($ACN) | 81.3% | 61.7% | 66.1% | 62.1% | 40.7% |
| EPAM Systems, Inc. ($EPAM) | 18.2% | 18.9% | 21.2% | 20.2% | 19.4% |
| Amdocs Limited ($DOX) | 13.0% | 14.4% | 11.9% | 15.9% | 14.5% |
| Gartner, Inc. ($IT) | 41.0% | -0.2% | 6.9% | 10.8% | 12.7% |
| Endava plc ($DAVA) | - | 36.0% | 29.6% | 26.1% | 9.8% |
| |
|---|
| Median (14 companies) | 7.3% | 4.7% | 6.9% | 9.9% | 7.8% |
|---|
| Cognizant Technology Solutions Corporation ($CTSH) | 21.3% | 21.9% | 23.8% | 20.4% | 17.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 4.0x | 3.2x | 3.3x | 4.0x | 4.0x |
| Gartner, Inc. ($IT) | 0.6x | 11.7x | 4.1x | 4.1x | 2.6x |
| Perficient, Inc. ($PRFT) | 0.4x | 1.0x | 1.3x | 1.0x | 1.5x |
| ServiceSource International, Inc. ($SREV) | 156.0x | - | -35.5x | 2.9x | 0.6x |
| Teradata Corporation ($TDC) | -1.1x | -1.5x | -1.3x | 0.9x | 0.5x |
| |
|---|
| Median (12 companies) | 0.3x | 0.6x | 0.8x | 0.2x | -0.3x |
|---|
| Cognizant Technology Solutions Corporation ($CTSH) | -0.4x | -0.4x | -0.1x | -0.3x | -0.3x |
