Cognizant Dec qtr net profit falls 39%; Francisco D'Souza to step down from board

New Delhi, Feb 6 () IT major Cognizant on Thursday posted an over 39 per cent decline in net profit at USD 395 million for the December 2019 quarter on account of factors like restructuring charges and said it expects topline in 2020 to grow by 2-4 per cent.

The company also announced that its co-founder and vice chairman Francisco D'Souza will leave the board effective March 31, 2020.

Besides, former managing director and CEO of Britannia Industries Vinita Bali has been appointed as a new independent director effective February 24, 2020.

The US-based company, which has a significant chunk of its workforce in India, had posted a net profit of USD 648 million in the October-December 2018 quarter.

Its revenue grew 3.8 per cent to USD 4.3 billion during the quarter under review from USD 4.1 billion in the year-ago period. In constant currency terms, this translated to 4.2 per cent growth.

"Our steady progress against key initiatives is increasingly evident in our commercial and financial performance. We enter 2020 with renewed vigour and optimism," Cognizant Chief Executive Officer Brian Humphries said.

He added that Cognizant is doubling investment in Cognizant Academy in 2020 to reskill and redeploy talent towards its digital imperatives.

The company believes it needs to hire or reskill about 25,000 resources in 2020 and has begun to operationalise on this, he noted.

For the full year, its net profit was down per cent to USD 1.8 million, while revenue was higher by 4.1 per cent to USD 16.8 billion in 2019 compared to the previous fiscal.

Cognizant said it expects its March quarter revenue growth to be in the range of 2.8-3.8 per cent in constant currency, which includes a negative 60 basis points impact from the exit of certain content services business announced last year.

For 2020, revenue growth is estimated to be in the range of 2-4 per cent in constant currency, taking into estimate a negative 110 basis points impact from the exit.

"Our operating performance and strong free cash flows in the fourth quarter reflect the actions taken throughout 2019 to improve our cost structure and instill greater operating discipline across the company," Cognizant CFO Karen McLoughlin said.

The 2020 outlook reflects the company's commitment to further improve cost structure to fund investments in growth.

"We are executing a balanced capital deployment strategy that is focused on reaccelerating topline growth through strategic acquisitions and other investments while returning capital to shareholders," she said.

In October, Cognizant had announced plans to slash up to 7,000 jobs in the next few months as part of cost-reduction efforts. It had also said it would partially exit from content operations business and the move would impact another 6,000 jobs.

During the December 2019 quarter, Cognizant incurred USD 53 million in realignment charges, including USD 4 million in employee separation costs, USD 27 million in employee retention costs and USD 22 million in third-party realignment costs.

For the year, it incurred USD 169 million of realignment charges that include USD 64 million of employee separation costs, USD 22 million of costs associated with CEO transition and the departure of the president, USD 45 million of employee retention costs and USD 38 million in third-party realignment costs.

Also, during the three months and year ended December 31, 2019, Cognizant incurred USD 48 million in restructuring charges, as part of its 2020 Fit for Growth Plan, that included USD 45 million in employee separation costs, USD 2 million in employee retention costs and USD 1 million in third party costs.

The charges included USD 5 million of costs incurred in 2019 related to the company's exit from certain content-related services.

On D'Souza's exit from the Board, Cognizant Chairman of the Board Michael Patsalos-Fox said as a key architect of Cognizant, Frank had helped lead the company through a quarter-century of remarkable growth and success.

"He leaves a powerful and unforgettable legacy as a global thinker, mentor, builder, and champion of initiatives that improve lives in our communities," he added.

D'Souza was elected to Cognizant's Board of Directors in January 2007 and served as Vice Chairman since June 2018.

He had co-founded Cognizant in 1994 and served as the company's CEO from January 2007 through March 2019.

In addition to his tenure as CEO, he also served as President from 2007 to 2012 and held a variety of senior management positions, including Chief Operating Officer, from 2003 to 2006.

"Frank has been an extraordinary leader. He deserves enormous recognition for his achievements at Cognizant. On a personal level, I am fortunate to have him as a trusted confidant and sounding board," Humphries said. SR MKJ