1. Cognizant net profit up 34 per cent sequentially

Cognizant net profit up 34 per cent sequentially

All-round growth across business verticals provides boost; firm reaffirms revenue growth guidance for the year at 8-10%

By: | Bengaluru | Published: May 6, 2017 5:14 AM
Cognizant follows a financial year stretching from January to December.

Nasdaq-listed IT services company Cognizant, which has a major presence in India, has reported a 34% sequential rise in net profit for the three months ending March, boosted by all-round growth across business verticals even as it reaffirmed its revenue growth guidance for the year at 8-10%.

Cognizant registered a net profit of $577 million for the first quarter of calendar year 2017, compared with $416 million in the three months ending December 2016. Cognizant follows a financial year stretching from January to December.

During the quarter, Cognizant reported a revenue of $3.55 billion, recording a sequential growth of 2.4% and beating market expectations. In contrast, TCS had recorded a growth of 1.5%, while it was 0.7% for Infosys and 2.7% for Wipro in the same period.

The operating profit margins improved to 18.9% at the end of the first quarter compared with 18.7% in the previous quarter. For the second quarter of 2017, Cognizant has provided a sequential revenue growth guidance in the range of 2.2-3.6%, while retaining its annual revenue growth.

“We’re making good progress in accelerating Cognizant’s shift to digital services and solutions to create value for clients and shareholders, positioning us well to achieve both our revenue and margin targets for this year,” said CEO Francisco D’Souza.

The Cognizant board has already approved a plan to return $3.4 billion to shareholders over the next two years through a combination of share repurchases and dividends. As part of this plan, the company expects to commence a $1.5-billion accelerated share repurchase (ASR) programme in the first quarter of 2017, and initiate a regular quarterly cash dividend of $0.15 per share, starting in the second quarter of 2017, and repurchase shares of $1.2 billion in the open market during 2017 and 2018.

Cognizant CFO Karen McLoughlin said, “Expanding our share repurchase programme and initiating a quarterly dividend reflect our ability to generate strong cash flows and confidence in the long-term strength of our business.”

During the quarter, Cognizant posted growth across all its verticals except for the healthcare sector, which remained flat. The financial services vertical, which was under certain pressure, bounced back this quarter with a sequential growth of 1.6%. However, the company made a net addition of just 1,000 people during this quarter on a sequential basis to take its total headcount to 2,61,200.

Cognizant has also announced an organisation realignment programme that will look into reassessing its less profitable businesses. “This realignment is part of our plan to improve our non-GAAP operating margin to 22% in calendar year 2019 while continuing to drive revenue growth,” Cognizant said.

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