The Nasdaq-listed and US-headquartered Cognizant Technology Solutions, which has a large number of employees in India, has outperformed the top three Indian IT companies in terms of net profit growth for the April-June quarter. The company’s revenue growth was marginally lower than market leader Tata Consultancy Services.
While reporting its second quarter numbers on Wednesday, Cognizant lowered its revenue growth projection for 2014 to 14 per cent from the 16.5 per cent guidance it had provided earlier.
Cognizant reported a net income of $371.9 million, up 23.8 per cent from the year-ago quarter and 6.6 per cent sequentially. Revenue rose to $2.52 billion, up 16.5 per cent from the year-ago period and 3.9 per cent sequentially.
R Chandrasekaran, Executive Vice-Chairman, Cognizant India, told BusinessLine that the higher operating margin of 21 per cent was driven by continued SG&A (Sales, General and Administration) leverage, a weaker rupee and higher employee utilisation compared to last year. The company expects non-operating margins to be within the targeted range of 19-20 per cent during the second half of 2014.
Revised guidance Due to weakness at certain clients and longer-than-anticipated sales cycles for some large, integrated deals, Cognizant is adopting a more conservative stance for the remainder of the year and is lowering its 2014 projection to at least 14 per cent revenue growth, said Cognizant CEO Francisco D’Souza, in a press release.
While announcing the financial results for 2013 in February, Cognizant had said that revenue for 2014 is expected to be at least $10.3 billion, up 16.5 per cent compared from 2013.
Banking on three deals During the June quarter, the company announced three deals totalling $3.5 billion in contract value, including a letter of intent with Health Net, a California-based managed-care organisation, for a seven-year deal.
Following contract finalisation and regulatory approval, the deal is expected to represent approximately $2.7 billion in total contract value, the largest in Cognizant’s history.
Gordon Coburn, President, Cognizant, said the company expects these three clients to generate at least $200 million in incremental revenue in 2015.
Cognizant closed the quarter with 1,242 active customers.
During the June quarter, it added around 8,800 employees to end the quarter with 187,400 people globally.
Stock repurchase The company’s board has approved an increase in the company’s stock repurchase programme from $1.5 billion to $2 billion, and extended the term of the programme to December 31, 2015.
Since the inception of the programme, ithas spent over $1.1 billion to repurchase its shares , the release said.