Cognizant Technology Solutions has reported a 2 per cent drop in net profit to $416 million for fourth quarter ended December 31, 2016 as against $423 million for the same quarter last year.
Quarterly revenue rose to $3.46 billion, up 7.1 per cent from the year-ago quarter and 0.3 per cent sequentially.
For full year ending December 2016, net profit declined marginally to $1.55 billion ($1.62 billion) while revenue increased to $13.49 billion, up 8.6 per cent $12.42 billion in 2015.
The US-based software company with development centres in India said that first quarter 2017 revenue expected to be in the range of $3.51 billion to $3.55 billion and full year 2017 revenue expected to be in the range of $14.56 billion to $14.84 billion.
Returning capital to shareholders:
The company's board has approved a plan to return $3.4 billion to shareholders over the next two years through a combination of share repurchases and dividends. As part of this plan, the company expects to commence a $1.5 billion accelerated share repurchase program in the first quarter of 2017, initiate a regular quarterly cash dividend of $0.15 per share commencing in the second quarter of 2017, and repurchase shares of $1.2 billion in the open market during 2017 and 2018, says a press release.
Beginning in 2019, the company plans to return approximately 75 per cent its US free cash flow (US free cash flow, a non-GAAP measure, refers to net cash provided from operating activities of our US operating subsidiaries less cash purchases of property and equipment by our US operating subsidiaries) on an ongoing basis to shareholders through a combination of dividends and share repurchases.
The capital return plan will be funded by current US cash balances, future cash flows from US operations and incremental debt financing and is designed to preserve the company’s financial flexibility to invest in future growth opportunities. The board of directors intends to continue to review the capital return plan for potential future increases, including the quarterly dividend, subject to company financial performance, economic outlook and any other relevant consideration, the release said.
Reaches deal with Elliott Management
Cognizant named three directors to its board in a deal with activist shareholder Elliott Management.
Elliott disclosed a more than 4 per cent stake in Cognizant in November and had urged the IT services provider to take steps to boost shareholder value.
The company also said fourth-quarter revenue rose about 7 percent to $3.46 billion from $3.23 billion helped by ongoing demand for its cloud services.
(With additional reporting from Reuters)