Cognizant Sees 20 Percent Surge In Revenue Due To Booming Health Care Business

Cognizant Technology Solutions on Monday said its health-care business skyrocketed almost 43 percent in the first quarter, leading its revenue to climb by more than 20 percent year over year.

For the first quarter of 2015 ended March 31, the Teaneck, N.J.-based solution provider reported revenue of $2.91 billion, up 20.2 percent from $2.42 billion in the year-ago quarter. Net income was also up, to $382.9 million, or 62 cents per share, compared with $348.9 million, or 57 cents per share, in the first quarter last year.

"Health care certainly did see a lot of growth," Malcolm Frank, Cognizant's executive vice president of strategy, told CRN in a phone interview. "Within health care, a lot of the drivers are digital. Late last year, we made the acquisition of TriZetto in health care. That is proceeding to play out ahead of schedule, so that drove a lot of the performance in that business. We are quite pleased with how that is playing out. We had a broad base of demands across the health-care practice."

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Cognizant, which is No. 10 on the CRN SP500 list, saw its health-care business climb to $879.1 million, up 43 percent from the first quarter last year, and made up 30 percent of the company's total revenue.

"Our customers and TriZetto's customers are both seeing that acquisition as a huge deal, and we are starting to see that play out very favorably in the marketplace," Frank said, referring to Cognizant's $2.8 billion acquisition of health-care software maker TriZetto last fall. TriZetto's software, used by several hundred health-care plans, aims to increase administrative efficiencies and improve the cost, quality and delivery of care, according to Cognizant.

"On the payer side, TriZetto was a game changer," said Cognizant President Gordon Coburn on a call with financial analysts Monday. "We already had a strong practice. Now we have an incredible practice, and payers across the board look to Cognizant to solve some of their toughest problems, whether it be on the cost side or on the innovation side controlling medical management costs, so I think we're incredibly well-positioned to help those payer clients and have a material impact on the delivery of health care in America and the cost of health-care delivery in America."

Cognizant saw its business in North America grow by nearly 25 percent year over year, to $2.29 billion, making up almost 80 percent of its total revenue. Financial services continues to be a large part of its core business, as it saw more than $1.16 billion in revenue, up 13.4 percent from the year-ago quarter, making up nearly 40 percent of its business by segment during the quarter.

Cognizant executives said that going forward, they expect to continue to see growth, thanks to its investments in digital services, which they said has placed the company in a good position as the industry shifts toward as-a-service business models.

"Everyone in the market has received the memo on digital, and they are trying to see where that applies in their business model and how they should proceed," said Frank. "Helping IT organizations get ready for this explosion in data, the new security needs -- how do they manage all these millions and millions of devices that are out there, and how do they tune their IT platform to be ready for these digital opportunities? ... It's clear that this is not a short-term issue, so this is a long-term scale driver."

Following its March quarter performance, Cognizant raised its outlook for the second quarter to $3.01 billion in revenue and added that its fiscal 2015 revenue is expected to be at least $12.24 billion, up 19.3 percent from 2014.

PUBLISHED MAY 4, 2015