Chennai, NFAPost: US-based Cognizant Technology Solutions reported a 29% fall in net profit for the second quarter (It follows calendar year) at $361 million, compared to $509 million in the corresponding quarter of the last year, due to coronavirus outbreak and ransomware attack.
Its revenue was down 3.4% to $4 billion for the second quarter ended June 30, 2020.
The company said, “Revenue across our business segments was negatively impacted by the COVID-19 pandemic and the ransomware attack, primarily in the month of April. Revenue and bookings improved sequentially through May and June, with increased client demand in areas such as cloud and enterprise application services, IT modernisation and digital engineering.”
Financial Services (34.9% of revenues) revenue decreased 5.2% year-over-year, or 4.3% in constant currency, driven by declines in both banking and insurance. North America saw mixed trends with relatively better performance in banking, driven by regional banks. It said that they continue to see weakness across global banking accounts and capital markets.
“I’m proud of our associates who maintained their focus on clients in the quarter despite being faced with unprecedented challenges,” said Cognizant CEO Brian Humphries.
“We delivered a solid second quarter performance whilst continuing to improve our competitiveness. Against an uncertain economic backdrop, we remain steadfast in investing in our clients and our associates, and in executing our digital strategy to position Cognizant for accelerated momentum,” he added.
Healthcare (28.9% of revenues) revenue grew 2.0% year-over-year, or 2.2% in constant currency. Segment revenue growth was driven by increases from life sciences clients, specifically by revenues from our acquisition of Zenith. Revenue in healthcare declined low single digits.
Products and Resources (21.7% of revenues) revenue decreased 6.5% year-over-year, or 5.0% in constant currency. The decline was driven by retail, consumer goods, travel and hospitality clients that were particularly adversely affected by the pandemic, partially offset by double-digit constant currency growth in manufacturing, logistics, energy and utilities.
Communications, Media and Technology (14.5% of revenues) revenue decreased 4.4% year-over-year, or 3.2% in constant currency, driven by a negative 790 basis point impact from its 2019 strategic decision to exit certain content-related services. Excluding that impact, Communications, Media and Technology grew approximately 5% in constant currency. Communication and media was flat, with the growth of certain communications clients offset by weakness with entertainment clients exposed to studios, cable TV and theme parks.
“We made progress against our cost structure initiative allowing us to fund investments aligned to our long-term growth strategy and delivered solid operating performance in a challenging environment,” said Cognizant Chief Financial Officer Karen McLoughlin.
“Strong free cash flow further strengthened our balance sheet and provides us with ample financial flexibility,” he added.
The company said for full year 2020, revenue expected to be in the range of $16.4-16.7 billion, or a decline on a constant currency basis of 2.0-0.5%. This assumes an estimate of a negative 20 basis points foreign exchange impact and a negative 110 basis points impact from the exit of certain content services business.
The company has declared a quarterly cash dividend of $0.22 per share on Cognizant Class A common stock for shareholders of record at the close of business on August 21, 2020. This dividend will be payable on August 31, 2020.
Cognizant appoints new Chief Financial Officer
Cognizant has announced that Jan Siegmund will be appointed Chief Financial Officer, effective September 1, 2020.
Siegmund most recently served as CFO of Automatic Data Processing (ADP), a leading global human capital management technology and service provider. He will succeed Karen McLoughlin, who will continue in the CFO role through August 31, 2020, and will remain with the company in an advisory role through December 31, 2020.
“Jan is an accomplished executive with a wealth of experience in finance, strategy and general management. He has the right set of leadership attributes and industry experience to help drive the continued execution of our strategic growth plan. We look forward to welcoming him to the team on September 1,” said CEO Brian Humphries.
Humphries added, “Karen has been an outstanding CFO and business partner, and has also been an invaluable resource for me during my first year with the company. We are not only thankful for her significant contributions over her tenure, but also for her commitment to ensuring a smooth CFO transition. On behalf of everyone at Cognizant, I wish Karen the very best in her next endeavors.”
Siegmund previously held various leadership and executive roles during his 20-year tenure at ADP, most recently serving as Corporate Vice President and Chief Financial Officer from 2012 to 2019. Prior to that, Siegmund was Chief Strategy Officer and President of ADP’s Added Value Services Division from April 2009 to October 2012, where he developed and executed the segment’s growth strategy through technology investments, acquisitions, and the creation of new distribution channels. He started his career at McKinsey & Company. Siegmund is a member of the Board of Directors of The Western Union Company, Cognizant said.