Cognizant CEO to focus on winning large deals as Q4 net profit sinks 9.5%

Ravi Kumar S, the newly appointed Chief Executive Officer of Cognizant Tech Solutions, addressed his first earnings call on February 3, where he focused on strengthening the company’s ability to win large deals, enhancing operating discipline and making Cognizant an employer of choice. Two-thirds of the company’s employees are based in India.

Cognizant, earlier today, reported a 9.5 percent year-on-year (YoY) decline in its Q4 net profit at $521 million.

The company's revenue stood flat at $4.8 billion on YoY basis. In constant currency terms, it was 1.3 percent higher. Sequentially, the Q4 revenue had declined marginally from $4.85 billion recorded in Q3. In constant currency terms, it was up 4.1 percent YoY.

For the full year, the company’s revenue grew 5 percent year-on-year, and 7.5 percent in constant currency. Cognizant follows the calendar year, and the fourth quarter was during the tenure of former CEO Brian Humphries.

The guidance for Q1FY23, the first quarter which will be under the new CEO and Chairman of the Board, is  $4.71-$4.76 billion, which is a decline of 1.5 percent to 2.5 percent. In constant currency, it is 1 percent down.

The company said it is not providing a full year guidance currently, and will share an update in early May when it announces the results for the next quarter.  

The focus of the company to win large deals is a departure from the company’s previous stance to stay away from large deals. 

Large deals, Ravi Kumar said, are top priority “given how essential they are to building commercial momentum and enhancing our station as a provider of business outcomes aligned by industry.” 

“Accelerating large deal bookings that will align with our risk appetite requires the client centricity and competitive self-confidence to work the corridors of our clients, cultivating and mining existing relationships, while hunting for new ones and always showing up with an informed point of view,” he said.

The company’s bookings for the quarter stood at $24.1 billion, up from $23.1 in Q3FY22. Ravi Kumar said he’ll be meeting 100 clients in 100 days, and will be monitoring 10 large deals as well.

“So India is an integral part of our strategy to differentiate and I'm going to spend the next few weeks in India as well, later part of February,” he told analysts after the results were declared.

“We'll continue to capitalize on this surge in the IT talent in India as we intensify efforts to recruit from India's Tier 2 cities as well. Our large associate base in India is an ongoing source of strength and differentiation for Cognizant and one in which we will continue to invest,” he said. 

Stephen Rohleder, who was appointed as the Chairman of the Board, said the two key priorities of the company will be the accelerations of revenue growth, and ensuring that Cognizant is the employer of choice in the industry. 

Attrition has been a pain point for the company, and it saw it decline from last quarter's 35 percent to 25 percent in Q4. While involuntary attrition was still at 6 percent, its voluntary annualised attrition was down to 19 percent from 29 percent last quarter.