Cognizant Q4 net up 39%

Leading IT services provider, Cognizant Technology Solutions, posted a GAAP net income which was 39% up at $96.3 million for the fourth quarter ending December 31, 2007, compared to $69.5 million in the fourth quarter of financial year 2006.

Excluding stock-based compensation expense of $9.8 million and a $5.9 million non-cash operating expense charge resulting from the nine-month impact of the recently-enacted and clarified fringe benefit tax on the exercise of stock options in India, non-GAAP operating margin was 20.3% - above the company's targeted 19-20% range.

Revenue for the fourth quarter of 2007 increased to $600 million (around Rs 2,370 crore), up 7% sequentially from $558.8 million in the third quarter of 2007, and up 41% from $424.4 million in the fourth quarter of 2006.

Cognizant derives 70% of its revenue from the financial services and healthcare industries, raising concerns of being exposed to a slowdown in the US economy, hence its results are keenly watched by analysts.

We are very pleased with our fourth quarter and full year 2007 financial performance, which was driven by strong growth across our business segments, service offerings and geographic regions, said Francisco D'Souza, President and CEO of Cognizant.

The company closed the acquisition of marketRx during the quarter, which it anticipates will enable Cognizant to further enhance "our strong market position in data analytics and the Life Sciences industry".

In Europe, the IT firm's revenue grew 89%, compared to the fourth quarter of 2006.

Guidance for 2008:

First quarter 2008 revenue is anticipated to be at least $640
million (around Rs 2,496 crore). Fiscal 2008 revenue expected to be at least $2.95 billion - up at least 38% compared to 2007.

Total headcount by end of 2008 expected to be between 72,000 and 75,000, reflecting the company's plan to increase utilisation throughout the year.

Our fourth quarter results are a testament to our ability to successfully manage our business while investing in Cognizant's growth platform around the world, said Gordon Coburn, Chief Financial and Operating Officer.

Throughout 2007, we continued to build our infrastructure to capture economies of scale and position Cognizant for long-term revenue growth. We generated approximately $150 million of cash from operations in the fourth quarter.

After the acquisition of marketRx and buying back approximately 3.39 million shares of Cognizant stock for $105.4 million, we ended the year with over $670 million in cash and short-term investments on our balance sheet, leaving us with the financial flexibility to invest in our people, services and infrastructure to further differentiate Cognizant in the marketplace.

Based on the demand environment and the strength of our growth platform, we believe that Cognizant will continue to outpace our overall market in 2008 and deliver value to our shareholders.

Highlights - Full Year 2007

Revenue for 2007 increased to $2.136 billion - up 50% from $1.424 billion for 2006.

GAAP net income was $350.1 million, or $1.15 per diluted share, compared to $232.8 million, or $0.77 per diluted share, for 2006.

Diluted earnings per share on a non-GAAP basis were $1.27. GAAP operating margin was 17.9%. Excluding stock based compensation expense of $35.9 million and a $5.9 million non-cash operating expense charge resulting from the recently enacted fringe benefit tax on the exercise of stock options in India, non-GAAP operating margin was 19.8%.

Reconciliations of these non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.