Health-Care, Finance Verticals Drive Cognizant Revenue Boost

Cognizant Technology Solutions saw double-digit revenue and earnings growth in the third quarter thanks to technology shifts in the health-care and financial services verticals.

The Teaneck, N.J.-based solution provider, No. 10 on the CRN SP 500, reported an 11.9 percent jump in sales for the quarter ended Sept. 30 from $2.31 billion to $2.58 billion, edging past analyst expectations of $2.57 billion.

Earnings rose 11.3 percent from $319.6 million to $355.6 million, or 66 cents per share on a non-GAAP basis. Analysts polled by Thomson Reuters expected earnings of 59 cents per share.

[Related: Cognizant Snaps Up Marketing Agency Cadient To Boost Life Sciences Business]

"I'm really excited about the new areas of growth and new ways of working," CEO Francisco D'Souza said during the earnings call. "We're confident in our strategy."

Cognizant also grew its workforce over the quarter by 12,300 -- or 6.6 percent, with recent college graduates from around the world comprising one-third of the new hires and experienced IT professionals comprising the remaining two-thirds, said chief financial officer Karen McLoughlin. The firm's global workforce now totals 200,000, she said.

This is a continuation of the company's investment over the past three years to build its social, mobile, analytics and cloud (SMAC) capabilities, D'Souza said.

Investors sent the company's stock up 7.9 percent since the end of day Tuesday to $52.34 per share. Earnings were released before the market opened Wednesday.

D'Souza cited healthcare as one of many verticals where Cognizant is dealing with the "dual mandate" of upgrading digital technology without incurring additional costs.

This has required Cognizant to gain efficiencies in legacy technology and invest in new digital capabilities, Malcom Frank, Cognizant's executive vice president of strategy and marketing, said during an interview with CRN after the earnings call.

Executives also detailed how it will finance its $2.7 billion acquisition of TriZetto, announced in mid-September. McLoughlin said Cognizant plans to use $1.7 billion of cash on hand, a $1 billion syndicated term loan and a $750 million unsecured revolving credit facility.

The TriZetto acquisition should allow Cognizant to provide offerings across the entire stack and facilitate cloud or as-a-service-based models, Frank said.

"We're just thrilled about the technology and capabilities," Cognizant President Gordon Coburn said during the earnings call. "We plan to take something that's good, and make it even better."

NEXT: Healthcare, Finance, Manufacturing See Growth

Cognizant reported revenue growth of at least 8 percent across all geographies and industry segments.

Strength in the insurance sector and demand for end-to-end solutions for mobile banking and card processing drove 13.4 percent growth in the financial services vertical to $1.08 billion, according to Coburn.

Net new business wins from existing and new clients in pharmaceuticals was tempered by a more cautious approach to investment in the payer sector following last year's spending on public health exchanges, Coburn said, resulting in 9.2 percent growth in the health-care segment to $655.4 million. An aging population and regulatory reforms have particularly disrupted the health-care sector, D'Souza said.

And manufacturing and logistics business have looked to modernize their existing systems and simplify their supply chains, Coburn said. That's led to 8.6 percent growth to $533 million.

"With digital, you can't just show up with a technology," Frank told CRN. "You have to understand how it translates to an industry."

By region, Coburn said Continental Europe saw 16 percent growth to $195.2 million, the United Kingdom saw 12.4 percent growth to $277 million and North America yielded 11.1 percent growth to $1.98 billion.

Moving forward, D'Souza said Cognizant is looking into ways to expand its offering beyond the CIO to end user's marketing departments, and exploring new ways to distill and apply meaning from data using data science and artificial intelligence.

Looking forward, D'Souza said a large number of multi-tower, integrated deals in the pipeline should fuel good organic growth heading into 2015. For this reason, Frank said Cognizant has invested heavily over the past decade in its management consulting division to engage in business-centric conversations across the executive suite.

"The fundamentals for demand are strong," D'Souza said.

The company raised its fourth-quarter revenue forecast to $2.61 billion to $2.64 billion, with earnings per share of at least 63 cents expected. Analysts polled by Thomson Reuters expected earnings per share of 59 cents on revenue of $2.58 billion.

PUBLISHED NOV. 5, 2014