Cognizant posts 26 percent jump in Q2 2008, outlook cautious

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Under the US accounting practice (US Generally Accepted Accounting Principles or GAAP), while the BPO major's revenue for June quarter increased to $685.4 million, up 32.70 percent from $516.5 million posted in the year-ago period, its net income rose from $82.3 million to $103.9 million in the quarter under review (year-on-year or YoY rise of 26.24 percent).

The quarterly diluted earnings per share or EPS on a GAAP basis was $0.35, compared to $0.27 in the year-ago quarter.

The company's business operations in Europe, from where it derives 20 percent of its revenues, has grown by 83 percent on YoY basis while the US continues to be Cognizant's biggest market, contributing a little over 78 percent of its revenues.

"GAAP operating margin for the quarter was 17.5 percent. Excluding stock-based compensation expense of $10.5 million and stock-based Indian fringe benefit tax expense of $5.9 million, non-GAAP operating margin was 19.8 percent, in line with the company's targeted 19 to 20 percent range," the New Jersey-based company said in a statement.

"Despite continued uncertainty in the marketplace, we exceeded our quarterly revenue guidance and our sequential growth once again outpaced our peer group in the second quarter," said Francisco D'Souza, president and CEO, Cognizant. "Several of our business segments, including Financial Services, performed well during the quarter. Furthermore, we generated continued strong performance across Europe and healthy growth from our Business/Knowledge Process Outsourcing and IT Infrastructure Services practices as a result of clients' focusing on cost efficiencies."

"Due to the continued deterioration in the macroeconomic environment and sagging consumer and business confidence," Cognizant has adopted a conservative outlook for the remaining year.

While revenue for Q3 2008 is anticipated to be at least $723 million, the revenue for fiscal 2008 is anticipated to be at least $2.81 billion.

"We are adopting a more conservative stance for the remainder of the year," D'Souza said. "However, we remain optimistic about our long-term growth prospects given that our pipeline of large deals remains healthy, our market position remains strong and the trend towards increasing offshore spending continues, driven by secular changes in industry dynamics, pressures to find cost efficiencies or, in some cases, both."

"Although we are disappointed with the necessity of reducing our outlook for the second half of the year due to the weakening economy, we are pleased to continue our expectation of industry leading growth and a healthy long-term outlook for the business," said Gordon Coburn, CFO and COO, Cognizant.

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