Francisco D’Souza to exit on 31 March, firm appoints Vinita Bali as independent director
Cognizant reports a net profit of $395 mn for Q4, down 39% from $648 mn a year ago
Cognizant Technology Solutions Corp. vice-chairman and co-founder Francisco D’Souza will exit the board on 31 March. D’Souza, who co-founded the company in 1994, was the longest-serving chief executive of the IT services firm from January 2007 through March 2019 when Brian Humphries took over.
Cognizant has also appointed Vinita Bali to its board as an independent director, effective 24 February. Bali was the managing director and chief executive officer of Britannia Industries from 2005 to 2014.
The Teaneck, New Jersey-based firm announced the appointments along with its fourth-quarter and full-year results on Thursday. Cognizant said it posted a net profit of $395 million for the fourth quarter ended 31 December, down 39% from $648 million in the year-ago quarter because of factors such as high restructuring costs. The company follows the calendar year.
Last quarter, Cognizant said it is simplifying its organizational model and embarking on a “Fit for Growth" plan that will involve strategic investments and measures to streamline the cost structure.
Revenue for the fourth quarter increased to $4.3 billion, up 4.2% in constant currency from the year-ago quarter, higher than the company’s guidance of 2.1-3.1% growth. The operating margin for the fourth quarter stood flat at 17%.
“Our steady progress against key initiatives is increasingly evident in our commercial and financial performance," CEO Brian Humphries said in a statement. “We enter 2020 with renewed vigour and optimism."
For the full year, Cognizant’s net profit declined 12% to $1.8 billion from $2.1 billion in 2018. Revenue for the full year increased 5.2% in constant currency terms to $16.8 billion, higher than the full-year revenue-growth guidance of 4.6-4.9%.
In terms of outlook, the company said it expects its first-quarter 2020 year-on-year revenue growth to be in the range of 2.8-3.8% in constant currency. For the full year, it expects the year-on-year revenue growth to be in the range of 2.0-4.0% in constant currency—both including the estimate of a negative 110 basis points impact from the exit of certain content services business.
The management said in an earnings call that “Cognizant is in the midst of a multi-year project whose aim is to reposition the company to realise its full growth potential. The company enters 2020 with a two-pronged strategy that aims to expose Cognizant to faster-growing market categories."
In 2020, Cognizant will double its investment in Cognizant Academy and plans to hire or re-skill around 25,000 resources. The annualised attrition rate declined 3% sequentially to 21%.
“Some is due to normalized seasonality," the management said.
Revenue from key verticals such as financial services (34.3% of revenue) and healthcare (28.5%) grew in lower single digits in the fourth quarter. Financial services revenue grew 1.2% year-on-year driven primarily by insurance. Healthcare revenue grew 1.6% helped by growth in life sciences and the contribution of Zenith Technologies, which Cognizant acquired in July 2019.
Revenue from products and resources (22.4% of revenue) grew 8.1% year-on-year driven by broad-based growth across industries.
Communications, media and technology (14.8%) revenue grew 8.0% year-on-year, again driven by broad-based growth across all the industries though “revenue growth in technology was negatively impacted by our previously announced decision to exit certain portions of our content services business," the company said.