Cognizant Q3 income rises to $544mn, expects to make offers to 45,000 new graduates in India in Q4

IT major Cognizant has reported about 56.3 per cent rise in September quarter net income at USD 544 million (around Rs 4,073.2 crore), and said it expects to make offers to 45,000 new graduates in India in the fourth quarter for onboarding in 2022.

The US-based company, which posted a net income of USD 348 million in September 2020 quarter, said the talent demand-supply imbalance in the industry remains "particularly acute" and that its third quarter voluntary attrition inched up to 33 per cent on an annualised basis, or 24 per cent on a trailing 12-month basis.

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Cognizant's revenue was about 12 per cent higher at USD 4.7 billion in the quarter as against USD 4.2 billion in the year-ago period. It had forecast its third quarter revenue to be in the range of USD 4.69-4.74 billion (a growth of 10.6-11.6 per cent or 10-11 per cent in constant currency).

Cognizant - which has about 2 lakh employees based in India - follows January-December as financial year.

"We executed well in the third quarter, delivering revenue of USD 4.7 billion, up 11.8 per cent year-over-year or 11 per cent in constant currency. Bookings growth, a key leading indicator, accelerated to 24 per cent y-o-y growth in the third quarter," Cognizant Chief Executive Officer Brian Humphries said during the investor call.

He added that digital revenue grew 18 per cent y-o-y in the third quarter, and represents 44 per cent of Cognizant's overall revenue mix.

"We expect this percentage to grow in future periods, positioning Cognizant for both top-line momentum and margin expansion. Moreover, the intimacy of our C-suite engagement increases as we serve clients in their digital transformations," he said.

He added that the company - which has invested approximately USD 3 billion in mergers and acquisitions over the past few years to broaden its portfolio - continues to make important investments to ensure Cognizant is well positioned to serve its clients as they embrace digital business models.

The company expects its fourth quarter revenue to be USD 4.75-4.79 billion, which translates into a growth of 13.5-14.5 per cent (13.3-14.3 per cent in constant currency). For the full year, the revenue is forecast to be about USD 18.5 billion, a growth of 11.1 per cent (9.8 per cent in constant currency).

Cognizant's headcount stood at about 3,18,400 people at the end of the September 2021 quarter, up from about 3,01,200 employees at the end of June 2021 quarter.

"Despite elevated attrition, we increased our net headcount in Q3 by over 17,000 sequentially, which speaks to the tremendous work and effectiveness of our recruitment team. Given our focus in recent years on accelerating fresher hiring in India, we've made meaningful progress on addressing our pyramid," he said.

Humphries added that in the fourth quarter, Cognizant expects to make offers to 45,000 new graduates in India for onboarding in 2022.

Indian IT companies like Infosys and Wipro are also witnessing high attrition numbers.

Humphries noted that retention and recruitment has the leadership's full attention.

"We are continuing our comprehensive programme to support our associates career growth and engagement to a range of initiatives that include: committed annual increases and evolved approach to promotions, job board, so associates can easily explore open leadership roles company-wide, abundant new training and development programs, sustained communication with our commitment to belonging and inclusion across our company and to society more broadly," he added.

In terms of verticals, Cognizant saw its financial services revenue grow 5.1 per cent y-o-y, while revenue of healthcare revenue rose 10 per cent y-o-y.

Products and resources revenue expanded by 19.4 per cent y-o-y, while communications, media and technology revenue increased 20 per cent y-o-y.

"During the third quarter, we drove strong bookings growth and maintained our revenue momentum in a robust demand environment. We are pleased with our ongoing investments in recruiting, which enabled us to support accelerating demand by meaningfully scaling our headcount," Cognizant CFO Jan Siegmund said.

Cognizant now expects full-year revenue growth of approximately 10 per cent in constant currency, towards the high-end of its prior range, Siegmund added.