US-based IT services major Cognizant will be rolling out bonuses for 2020, which it has said will be higher what it gave out in 2019. Cognizant also announced ‘targeted merit increases and promotions’ in the fourth quarter.
These announcements came in the backdrop of the company announcing its results for the third quarter (July-September) of 2020. Cognizant reported a 30% fall in its net profit to $348 million and 0.1% drop in revenue to $4.2 billion for its third quarter as compared to the same period last year. Cognizant follows a January to December financial year.
The company said that it expects its full year 2020 revenue to be approximately $16.7 billion, which is a decline of 0.4% on a constant currency basis. It expects full year Adjusted Operating Margin to be approximately 15%.
Speaking at the earnings conference call, CEO Brian Humphries said that the company anticipates some sequential increases in voluntary attrition in the coming quarters after the merit-based promotions and salary increase cycle.
“We are also implementing targeted merit increases and promotions in the fourth quarter. Both will hurt our cost structure in 2020 versus the prior year but are an essential and normalized part of the cost structure in the services business,” he added.
Segment wise, Cognizant saw its financial services revenue decrease 1.5% year-over-year, driven by declines in both banking and insurance. This segment contributes 34.6% to the company’s total revenues. Healthcare, which makes up 29% of revenues, grew 4.8% year-over-year driven by life sciences.
Products and resources revenue decreased 4.0% year-over-year, while communications, media and technology revenue increased 0.2% year-over-year.
"Our cost discipline and strong year-to-date cash flow enabled continued investments in growth initiatives. We took further actions to increase our financial flexibility in support of our strategic priorities. Since the beginning of the third quarter, we returned over $800 million of capital to shareholders through share repurchases and dividends,” said Jan Siegmund, Chief Financial Officer.
Speaking on H-1B visas, CEO Brian said Cognizant is an H-1B visa dependent organisation, though it has reduced dependency on visas over the years. He added that the company intends to comply with the letter of the law for these visa applications.
“We've also acquired companies that enable us to be more global in nature. But in the same vein, some of the strategic decisions we took, which were in the right decisions, including exiting a portion of content moderation has put us back a little bit. That being said, the rule is solely triggered by new applications and extensions and H1B visas are currently under a three-year visa. So, this will roll in gradually, and I would say, I don't want to reassure everybody, our intention is to globalize Cognizant,” Brian added.