Cognizant Q2 profit up 13%; hikes revenue outlook

Buoyed by strong growth in healthcare and financial services business, IT services firm Cognizant on Wednesday posted a 12.9 per cent jump in net profit for the June quarter and revised its forecast for revenues to grow “at least 20.1 per cent” in the ongoing fiscal.The US-based firm, which has major presence in India, has reported a net profit of $420.1 million in the second quarter of 2015 as against $371.9 million in the same period a year ago.

Revenues for the April-June 2015 quarter rose by 22.6 per cent to $3.09 billion as against $2.52 billion in the year-ago period, beating its own estimate of revenues to be “at least $3.01 billion”. The revenue was up over 6 per cent from $2.91 in the January-March quarter.“Our second quarter sequential revenue increase in dollar terms was the strongest in our history. We’re seeing robust demand for our services, a trend that has continued to accelerate from the first quarter,” Cognizant CEO Francisco D’Souza said in a conference call.

He added that there is robust underlying demand across the geographies and industries that it serves.“Clients are recalibrating their spending, moving dollars from lights-on maintenance and operations projects to new digital initiatives. We are in a strong position to capture the enormous opportunities that are emerging from the transition to digital business,” he said.

Cognizant follows January-December as its fiscal year.“Growth drivers are wins in digital, executing digital transformations and innovation-at-scale; driving new levels of operational efficiency for clients; and strategic investments paying off,” Cognizant CFO Karen Mcloughlin said.Cognizant has also raised its revenue guidance for 2015 to $12.33 billion, up around 20.1 per cent compared to 2014 (from $12.24 billion or 19.3 per cent growth).

For the July-September quarter, Cognizant expects its revenue to be at least $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,” Mcloughlin said.

last month, Cognizant had anticipated a $100 million hit to its incremental revenue in July-December of 2015 stating that it expected its $2.7 billion contract with Health Net may not be implemented if the latter is acquired by Centene Corporation.Financial services grew 18.1 per cent (accounting for 40.5 per cent of revenues), while healthcare was up 39 per cent (29.1 per cent of revenues) andmanufacturing/retail/logistics grew 12.4 per cent year-on-year (18.7 per cent of revenue).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.