Original Source: FD (FAIR DISCLOSURE) WIRE
. Peter Schmidt, Financial Dynamics, IR . Lakshmi Narayanan, Cognizant Technology Solutions Corp., President & CEO . Frank D'Souza, Cognizant Technology Solutions Corp., COO . Gordon Coburn, Cognizant Technology Solutions Corp., EVP & CFO
CTSH reported 2Q05 revenue of $211.7m. Diluted EPS was $0.25. For 3Q05, the Co. is projecting revenue of at least $232m and EPS of $0.26. Q&A Focus: Headcount, GM, and markets.
A. Key Data From Call 1. 2Q05 revenue = $211.7m. 2. 2Q05 diluted EPS = $0.25. 3. Cash and short-term investments at the end of 2Q05 = over $326m. 4. DSO, including unbilled receivables = 71 days. 5. Full-year 2005 revenue guidance = at least $876m. 6. 3Q05 revenue guidance = at least $232m. 7. EPS guidance for full-year 2005 = approx. $1.01. 8. EPS guidance for 3Q05 = $0.26.
S1. Performance Drivers (L.N.) 1. Opening Comments: 1. CTSH delivered solid performance in its key financial and operating metrics.
2. The Co strengthened its leadership position as a highly
differentiated provider of IT services, experiencing continued
demand across all our vertical practices and service offerings.
3. Continued to invest aggressively in people and infrastructure
to maintain the ability to meet customers' growing demands for
an ever-evolving set of solutions and mgt. of highly complex,
large-scale programs. 2. Four Key Drivers of Performance:
1. Many companies beyond financial services are increasingly
recognizing the value of broadly adopting offshore-enabled IT
and business process outsourcing (BPO). 1. The Co. has experienced particular strength in healthcare and life sciences verticals, as evidenced by strategic client wins in those industries. 2. During 2Q05, CTSH signed one of the largest pharmaceutical companies in the world as a new strategic client. 3. The Co. is now partnering with five of the Top 10 global pharmaceutical companies. 2. CTSH is seeing significant traction in the ERP space and the enterprise business solutions space, specifically in SAP. 1. Investments in SAP practice, coupled with the alignment of specific verticals are starting to show promising momentum. 2. CTSH has also built a unique SAP portfolio analysis model that helps customers take a structured and scientific approach in identifying areas in SAP more suitable for offshoring. 3. During 2Q05, CTSH won a number of key accounts to provide global support, upgrade, and custom development solutions in SAP. 4. The Co.'s close association with SAP Labs in India on training and other activities on the NetWeaver platform
gives it the ability to work on complex system integration and client engagements. 5. CTSH has continued to strengthen its solid capabilities in the CRM space. 3. The Co. has seen increased traction for its high-end vertical business process outsourcing (vBPO) offering. 1. Continued to build out strategy and organization in this area. 2. Over the past several months CTSH has begun BPO projects for clients in the life sciences and healthcare sectors,
addressing high-value process areas. 3. Previously announced BPO engagement with Pfizer India has made significant progress, and beat the milestones laid out for this engagement. 4. Over the next several quarters, the Co. anticipates expanding its vBPO presence.
5. A key aspect of the current and anticipated progress in this
area has been the recruitment of a number of experienced senior process managers, including Ramesh Gudalur, who joined from (Indiscernible).
6. CTSH does not anticipate that vBPO will reach meaningful numbers in terms of headcount or financial contribution until 2006.
4. CTSH has seen robust growth in demand for its business
intelligence and data warehousing services. 1. The Co.'s study showed that from 2002 to 2004, the size of its customers' data warehouses grew by 400% annually. 1. As measured by the avg. number of reports produced per data warehouse. 2. Activity was driven by an increase in demand for data warehousing solutions that enable Sarbanes-Oxley compliance and provide competitive intelligence. 3. CTSH saw a 40% CAGR in the number of companies making investments in compliance reporting and a 50% annual increase in companies consolidating stand-alone data marts and business intelligence systems. 4. To take advantage of this trend, CTSH introduced offerings specifically aimed at meeting its clients' growing needs in this area. 5. The growth has been driven by CTSH's investment in the data warehousing technology and the frameworks, which substantially enhance ROI on its customers' IT investments. 3. Fathom Solutions: 1. 1Q05 acquisition of Fathom Solutions has already provided CTSH with a number of additional cross-selling opportunities, particularly in the telecommunications sector.
S2. Telecom Sector (F.D.) 1. Fathom Solutions: 1. Fathom brought several key strengths to CTSH in terms of IT strategy, process design, program mgt., and systems integration. 2. Jeff Lee, one of Fathom's founders, became North American managing director for CTSH's telecommunications practice. 3. The Co. is actively combining Fathom's traditional strengths in IT and operational strategy and process design and improvement with CTSH's traditional technology development and systems integration capabilities to propose end-to-end business-aligned IT solutions to customers.
4. In the telecom vertical, the combination allows CTSH to
propose cost-effective solutions to some of the most pressing
industry issues. 5. As a result of teaming with Fathom during 2Q05, CTSH was awarded two significant engagements in the data warehousing and CRM space by a large residential long-distance co. in the US. 1. The Co. expects to see similar opportunities as it continues the process of integrating Fathom more closely into the CTSH team.
S3. Operational Details (L.N.) 1. 2Q05 Financial Highlights: 1. Revenue of $211.7m, up 17% sequentially vs. $181.7m in 1Q05,
and up 53% from 2Q04. 2. Diluted EPS was $0.25 vs. $0.22 for 1Q05 and $0.17 in 2Q04. 3. Operating margin remained a healthy 20%. 1. The strong demand environment continues to allow the Co. to maintain solid margins, even while absorbing the impact of a previously-announced wage increase, which took effect at the beginning of 2Q05. 2. New Clients: 1. CTSH added approx. 28 new customers during 2Q05, five of which are strategic …