Cognizant Technology Solutions Corporation has withdawn the full-year guidance on its financial performance for the year 2020 amid uncertainities brought on by the Covid-19 crisis. The withdrawal comes on the back of falling client demand, expecially in the travel and hospitality space.
The compaany put first quarter revenue at $4.22-4.23 billion, up 2.7-2.9 per cent (3.4-3.6 per cent in constant currency) over the previous year's quarter. This included a negative 50-basis-point impact from the exit of certain content services.
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The company said today its financial performance during the first two months of the quarter was on track to exceed the previous guidance, driven by a strong show across the North American market. However, during the second half of March, Covid-19 increasingly affected its business causing delays in project fulfillment as delivery, particularly in India and Philippines, was being done on a work-from-home basis.
During the second quarter starting April, the company expects the pandemic to further reduce demand as Covid-19 will have a larger impact on society and the economy, causing broader disruptions across industries.
"The long-term fundamentals of our business remain strong. However, given the unprecedented nature of this crisis, the uncertainty about its duration and its impact on our ability to forecast performance, the company is withdrawing its 2020 guidance that was provided on February 5, 2020," Cognizant said.
On February 5, the company had put year-on-year revenue growth for the whole of 2020 in the range of 2-4 per cent in constant currency terms. This includes an estimated negative 110-basis-point impact from the exit of certain content services business it had announced earlier.
Commenting on the latest first quarter guidance, Brian Humphries, Chief Executive Officer said, "I am pleased with our business momentum in the first two months of the quarter and grateful for the dedication and professionalism of our associates in March, both of which enabled us to meet our previously announced revenue guidance."
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"In this fluid environment where uncertainty prevails, we are well-positioned with deep client relationships across more than a dozen industries, and a strong balance sheet that provides solid financial flexibility," he added. The company, which has 292,000 associates, acted fast to limit the impact of Covid-19 on its business by enabling work-from-home capabilities across its delivery teams, Humphries said.
In order to strengthen financial flexibility, Cognizant took steps such as drawing down $1.74 billion on its revolving credit facility on March 23, bringing the Company's total cash and investment balance as of March 31 to around $4.7 billion (which includes a $400 million in restricted time deposits in India), or net cash of $2.2 billion. The Company has no significant debt maturities until 2023. During the first quarter, it completed the acquisitions of Code Zero and Lev and repurchased approximately eight million shares. Since March 31, it has not initiated any new share repurchase schemes.
"We are confident that the combination of our strong balance sheet, and our robust operating and cash generative business model, will enable us to weather this disruption," said Karen McLoughlin, Chief Financial Officer. "The execution of our 2020 Fit for Growth program along with prudently managing our cost structure to react quickly to changes in the demand environment is critical to maintaining financial flexibility to navigate near-term headwinds while repositioning the business for long-term success."
The company has earlier announced that in India and the Philippines, Cognizant will offer staff at the associate level and below an additional payment of 25 per cent of base pay for the month of April. Cognizant has also offered 14 days sick-leave coverage globally for Covid-19 cases without impacting other sick leave or vacation programmes.
It has announced a $10-million philanthropic commitment to support communities around the world in addressing the pandemic's immediate and long-term impact. Cognizant and its US- and India-based foundations will provide critical resources to strengthen public health systems, education and workforce institutions, and the economic outlook of communities worldwide, the company said.
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