Cognizant, a US-based software company, reported a 3% increase in net profit for the fourth quarter, reaching $580 million, citing lower administration costs and higher other income. The company’s revenue for the three-month period that ended in March declined 0.3% YoY to $4.81 billion but surpassed Street estimates of $4.74 billion.
The company’s bookings in the quarter ended March grew 28% YoY, with bookings on a trailing 12-month basis reaching $25.6 billion, up 9%. The company’s attrition on a 12-month basis decreased to 23% from 30% YoY, with total headcount at the end of the first quarter standing at 351,500, a decrease of 3,800 from the previous quarter, and an increase of 11,100 from the same period last year.
Layoffs ahead
Additionally, Ravi Kumar, CEO of Cognizant, said that “I’m especially optimistic about the strength of our portfolio and partner ecosystem combined with our ability to create value for clients at the intersection of technology and industry use cases.” Furthermore, he commented “I see increasing associate optimism and pride in our company. Our associates want to partner with me to begin writing the next chapter in Cognizant’s nearly 30-year history. We’re moving forward with renewed confidence about the future of Cognizant.”
However, Cognizant also announced a two-year restructuring plan aimed at simplifying its operating model and rationalising office spaces, which is expected to cost $400 million. As part of the plan, the company expects to lay off around 3,500 employees or 1% of its workforce, which will negatively impact operating margins by up to 180 basis points in the current fiscal year.
Ravi Kumar also expressed confidence in the company’s performance, noting the accelerated bookings growth in the quarter, which included several large deals and a healthy mix of new and expansion work. Kumar also expressed encouragement over the continuing reduction in voluntary attrition. The company’s second-quarter revenue is expected to come in at $4.83 billion to $4.88 billion, representing a decline of 1.0% to flat in constant currency.
The company also initiated a “NextGen” programme aimed at simplifying its operating model, corporate functions and consolidating office space, which is expected to incur costs of around $400 million, with $350 million of those costs anticipated in 2023 and $50 million in 2024.
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