Cognizant net profit up 23.8%

The company revised guidance for full year 2014 to 14% versus 16.5% earlier

Cognizant Technology Solutions, the Nasdaq-listed information technology (IT) services company, has posted a growth of 23.8% in net profit at $371.9 million during the second quarter ended June 30, 2014, as compared to $300.4 million during the same period of last year. The company has revised its guidance to 14% for the year 2014, as against the previous guidance of 16.5%, due to the weakness at certain clients and longer sales cycles, said the company.

The US-headquartered company has posted a growth of 16.5% in revenue during the quarter, at $2.52 billion as against $2.16 billion in the corresponding quarter of 2013. The GAAP operating margin for the quarter was 19.4% and the Non-GAAP operating margin was 21%, higher than the Company's target range of 19-20%, said the company.

Commenting on the full year guidance, Francisco D'Souza, Chief Executive Officer of Cognizant, said, "Due to weakness at certain clients and longer than anticipated sales cycles for certain large integrated deals, we are adopting a more conservative stance for the remainder of the year and revising our 2014 revenue guidance to growth of at least 14% over the prior year, while maintaining our full year non-GAAP EPS guidance of $2.54,"

"We continue to believe that we have the right strategy and portfolio of services to deliver long-term industry leading growth and also meet the ever changing demands of the market," he added.

"We are pleased to announce three transformational engagements for our clients totaling $3.5 billion in contract value, including a letter of intent with Health Net, Inc., a leading California-based managed care organization. The Health Net engagement is a seven year deal, and following contract finalization and applicable regulatory approval, is expected to represent approximately $2.7 billion in total contract value, the largest in our history," said Gordon Coburn, President of Cognizant.

"We expect these three clients to generate at least $200 million in incremental revenue in 2015," he further stated. These engagements are illustrative of the success of the company's strategy of re-investing in its business to meet clients' dual mandate of 'running better' to drive operational efficiency and 'running different' to drive growth and innovation, he added.

During the third quarter of the year, the company is expecting its revenue to grow to between $ 2.55 and $2.58 billion.

"We continued to generate healthy profitability during the first half of 2014, as our non-GAAP operating margins came in higher than our targeted range of 19 to 20%. We believe this positions us well to absorb our annual wage increases in the third quarter of 2014," said Karen McLoughlin, Chief Financial Officer, Cognizant.