Mumbai: Technology services provider Cognizant reported a 3.5% year-on-year growth in revenue in constant currency terms for the first quarter on Thursday, in line with analyst expectations. The company, however, indicated a sluggish second quarter due to the double whammy of the Covid-19 pandemic and the Maze ransomware attack.
The New-Jersey headquartered company posted revenue of $4.22 billion in the first quarter ended March compared with $4.11 billion in the year-ago period. In terms of deal winnings, Cognizant saw its best quarterly performance since 2017, it said. Total contracts awarded in the quarter rose 30% year-on-year, according to the company.
Cognizant's net profit in the first quarter fell 20% to $367 million compared with $441 million in the year-ago period. The company's operating margin stood at 15.1% in the quarter, compared with 17% in the fourth quarter ended December.
On the company's performance in the quarter CEO Brian Humphries said, “We executed well in what was a challenging quarter, and posted our strongest quarterly signings since 2017. While we expect a challenging demand environment throughout 2020, we believe the pandemic is accelerating the secular trends of core modernization and cloud migration as companies shift to digital business models. These and other related IT trends play directly to Cognizant’s strategy."
The company expects margins to remain below 16-17% in 2020. It indicated weakness in the second quarter including a $50-70 million impact due to the Maze ransomware attack, apart from business demand uncertainty and increased costs due to the COVID-19 pandemic.
The company's digital revenue as a percentage of total revenue was 41% for the first quarter and grew by 19% year-over-year.
Difficult macroeconomic conditions notwithstanding, CEO Humphries signalled that the firm would continue to look for acquisition opportunities, "While we will be prudent in this uncertain economic backdrop, this confidence allows us to nonetheless invest in M&A to accelerate our strategy and bolster our capabilities."
Earlier this week, the technology services provider entered into an agreement to acquire US-Collaborative Solutions, a private consultancy specialized in cloud applications for finance and human resources. This was its fourth acquisition of a cloud-services related business in the year so far.
Cognizant spent $10 million in employee retention costs in the first quarter and $26 million to pay for the employees it has let go as a part of its ongoing restructuring initiatives.
Citing the uncertain impact of the pandemic on business and the technology firm earlier withdrew its full-year guidance. It also drew down on $1.74 billion in debt in April to boost its financial flexibility and had stopped share buyback.