Cognizant's Q4 net up 16 per cent; meets 2012 revenue guidance

Cognizant today posted 16 per cent rise in net profit at $278.77 million on the back of $1.94 billion  revenues, maintaining its lead over Infosys for the third consecutive quarter.

The NASDAQ-listed firm has, however, forecast a lower revenue growth of 17 per cent for 2013 to "at least $8.6 billion", compared to 20 per cent growth achieved in fiscal year 2012.

The net profit of the company, which follows January-December fiscal, stood at $240.12 million in the fourth quarter of 2011.

Revenues of the company increased 17 per cent to $1.94 billion in October-December 2012 quarter from $1.66 billion a year ago, in line with its guidance of "at least $1.94 billion".

For the first quarter of 2013, Cognizant expects its revenues to be "at least $2 billion".

The results are in line with the performance of rivals -- Tata Consultancy Services and Infosys, which reported better-than-expected earnings earlier this month on back of client additions and higher IT spending by existing customers.

TCS' revenues in the October-December 2012 quarter stood at about $3 billion, while that of Infosys and Wipro stood at $1.9 billion and $1.57 billion, respectively.

Though it is not listed in India, about 75 per cent of Cognizant's over 1.56 lakh employees are based in India and is often referred to as an Indian entity.

Cognizant said it acquired US-headquartered MediCall, a medical management services firm with operations in the Philippines, in middle of October-December 2012 quarter.

"This small but strategic acquisition adds about 600 employees to our headcount, and is expected to contribute an incremental $15 million in revenue in 2013," Cognizant President Gordon Coburn said.

Earlier in the year, Cognizant also announced its intent to acquire six companies of Germany-based consulting and IT services firm C1 Group. "The full-year revenue guidance of 17 per cent growth includes anticipated acquisition revenue of $90 million," he said.

For the year 2012, Cognizant's net profit grew 19 per cent to $1.05 billion, while revenues were up 20 per cent to $7.34 billion in 2012. It had forecast 20 per cent growth in revenues for 2012 to be at least $7.34 billion.

"The active customer base stood at 821, which included six strategic customers. The total strategic customers of the company now stands at 214," Cognizant CFO Karen McLoughlin said on a conference call.

Strategic accounts are those clients which have the potential to ramp up from at least $5 million to more than $50 million in annual revenue.

About the outlook, McLoughlin said, "We continue to see a trend towards our newer strategic customers embracing a wider range of Cognizant's services at an earlier stage in the relationship."

Generating broad-based industry leading growth of 20 per cent within a tough demand environment of 2012 is a testament to the strength of Cognizant's business model, she added. The company added over 6,300 people (net) in the quarter, taking its headcount to approximately 156,700.

Of the gross additions in the quarter, 39 per cent were direct college hires, while 61 per cent were experienced professionals.

During the 2012 fiscal, Cognizant added about 19,000 (net) employees worldwide.

The attrition rate in the fourth quarter of 2012 stood at 10.7 per cent compared to 13 per cent in July-September quarter.

Around 39 per cent of gross additions for the quarter were direct college hires, while 61 per cent were lateral hires of experienced professionals.

"We ended the quarter with over 156,700 employees globally. During 2012, we added approximately 19,000 net new employees worldwide," the company said.

Cognizant's cash and short-term investments balances grew by $430 million during the year to $2.9 billion.

"We spent about $126 million for capital expenditures during the quarter. During 2013, we expect our capital expenditures to total approximately $400 million," she said.

Consulting and Technology Services, which represented 50.4 per cent of the quarter's revenue grew 15.2 per cent year-over-year.

Outsourcing services comprised 49.6 per cent of the revenues and grew 19.1 per cent year-on-year.
Financial Services accounted for 41.9 per cent, while healthcare and manufacturing, retail & logistics contributed 25.7 per cent and 21 per cent, respectively of the company's revenues.

Nearly 79 per cent of the company's revenues came from North America, 10.6 per cent from the UK, Rest of Europe (6.2 per cent) and Rest of World (4.4 per cent).

"Across financial services, healthcare, life sciences, retail, manufacturing, media, information services, and high technology, the combination of economic shifts and technology transformation - driven by social, mobile, analytics and cloud technologies - is creating game-changing opportunities across the markets we serve," McLoughlin said.