Cognizant records highest attrition rate among peers, raises annual revenue guidance

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Chennai: Cognizant Technology Solutions Corp. raised its revenue growth guidance into double digits due to strong demand for its services, but attrition remains a key concern for the US-based company that has over two thirds of its employees in India.

The Nasdaq-listed company reported an attrition rate of 31% in the second quarter, the highest among IT services companies in the three-month period to June 30. In the previous quarter, Cognizant clocked a quarterly annualised attrition rate of 21%. Voluntary attrition in the second quarter stood at 29%. The company has over 301,200 employees.

Cognizant’s attrition rate is higher than the industry average. For the quarter ended June, TCS’s attrition rate stood at 8.6%,

Infosys

‘ at 13.9%,

Wipro

at 15.5% and HCL Tech’s at 11.8%. Accenture had reported 17% attrition in the March to May quarter.

Attrition has been one of the company’s biggest concerns with Cognizant CEO Brian Humphries in May saying that the software major has had to let go of new business due to the company’s inability to hire talent while on a call with analysts following the company’s first quarter results. This is significant as the software industry is seeing a massive demand for outsourcing, especially through the pandemic.

Cognizant’s revenue of $4.6 billion grew 14.6% year-over-year (12.0% in constant currency) in the second quarter, its best quarterly revenue so far. Digital revenue grew approximately 20% year-over-year, and now represents 44% of total revenue.

“We delivered a strong second quarter,” said Humphries in a statement on Thursday. “Through targeted investments, we’ve been shifting our portfolio to faster-growing market segments while extending our capabilities and partnerships to help clients build modern businesses. I see a stronger, more competitive Cognizant emerging, with growing commercial momentum. We are bullish on the industry and our prospects within it.”

The company said $1.5 billion has been deployed on acquisitions, share repurchases and dividends year-to-date.

The company also increased its 2021 revenue growth guidance on the back of strong demand.

“Second quarter top-line results exceeded our guidance, driven by improved demand for our services and momentum in our digital revenue, and we increased our full-year 2021 revenue growth to 10.2-11.2%,” said Jan Siegmund, Chief Financial Officer. “To meet the strong client demand for our services, we have continued to scale our recruiting capabilities and invest in our people.”

The company also added that the guidance for the full year 2021 revenue is expected to be $18.4-$18.5 billion, or growth of 10.2-11.2% (9.0-10.0% in constant currency).

Revenues in financial services, which constitutes 32.8% of the company’s revenues, grew 7.6% year-over-year, or 4.8% in constant currency. This included the benefit of recently completed acquisitions and growth in digital revenue, the company said in a statement.

It said revenue declines related to non-digital services continued to pressure results as clients optimize the cost of supporting their legacy systems and operations.

The company also made a special mention in its statement about how year-over-year growth across all segments reflects the impact on 2020 revenues from the pandemic and the April 2020 ransomware attack.

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