Cognizant Q2 profit up 13%; raises revenue outlook to 20%

Cognizant Q2 profit up 13%; raises revenue outlook to 20%

IT services firm Cognizant today posted 12.9 per cent increase in net profit to USD 420.1 million for the second quarter this year, revising revenue growth guidance to 20.1 per cent for the fiscal.

The US-based firm, which has major presence in India, had reported net profit of USD 371.9 million in the year-ago period, it said in a release.

Its revenues for the April-June quarter of 2015 rose by 22.6 per cent to USD 3.09 billion as against USD 2.52 billion in the year-ago period, beating its own estimate.

Revenue was up over 6 per cent from USD 2.91 in the January-March quarter. Cognizant follows January-December as its fiscal year.

"Our second quarter sequential revenue increase in dollar terms was the strongest in our history. These results validate that our business strategy and our investments position us well to capture the emerging opportunities as clients look to transform into digital businesses," Cognizant CEO Francisco D'Souza said.

For the quarter, Cognizant had said earlier it expects revenues to be "at least USD 3.01 billion".

Cognizant has raised its revenue guidance for 2015 to USD 12.33 billion, up at least 20.1 per cent compared to 2014 (from USD 12.24 billion or 19.3 per cent growth).

For the July-September quarter, Cognizant expects its revenue to be at least USD 3.14 billion.

"Our strong performance has allowed us to raise our full year revenue and EPS guidance for the second time this year, despite the impact to our full year revenues from the announcement that Health Net would be acquired by Centene Corporation," Cognizant CFO Karen McLoughlin said.

Last month, Cognizant had anticipated a USD 100 million hit to its incremental revenue in July-December of 2015 stating that it expected its USD 2.7 billion contract with Health Net may not be implemented if the latter is acquired by Centene Corporation.

"We continue to optimise our existing services and aggressively invest in new services to enable clients to drive higher levels of operational efficiency. These new solutions, being developed and deployed across all of our major business units, are fundamentally changing business models," Cognizant President Gordon Coburn said.

With over 100 development and delivery centres worldwide, Cognizant has about 218,000 employees as of June 30, 2015.

North America contributed 78.6 per cent of the revenue, followed by Europe 16.3 per cent and Rest of the World 5.2 per cent.

"We continue to optimise our existing services and aggressively invest in new services to enable clients to drive higher levels of operational efficiency. These new solutions, being developed and deployed across all of our major business units, are fundamentally changing business models," Cognizant President Gordon Coburn said.

With over 100 development and delivery centres worldwide, Cognizant has about 2.18 lakh employees as of June 30, 2015.

Offshore utilisation increased by almost 300 basis points to about 73 per cent, while onsite utilisation was about 93 per cent during the said quarter.

"While attrition historically is seasonally higher in Q2 due to the timing of bonus payouts and associates leaving for higher education, second quarter annualised attrition this year, at 19 per cent, was higher than normal," McLoughlin said.

Cognizant is working to improve retention levels through a number of employee engagement initiatives, she added.

Cognizant added seven strategic customers in the quarter, defined as clients that have the potential to generate at least USD 5-50 million or more in annual revenue, bringing the total number of strategic clients to 285.

"Our balance sheet remains very healthy. We finished the quarter with approximately USD 3.57 billion of cash and short-term investments," McLoughlin said.

In June 2015 quarter, consulting and technology services and outsourcing services represented 57 per cent and 43 per cent of revenue, respectively. 

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