Syntel Reports Third Quarter 2017 Financial Results

Highlights:

  • Q3 revenue of $231.3M, down 4% from year-ago quarter and up 2% sequentially
  • Q3 EPS of $0.58 per diluted share, as compared to a loss of $2.58 in the year-ago quarter and EPS of $0.44 in the prior quarter.
  • Q3 cash & short term investments of $109M
  • Global Headcount of 21,928 on September 30, 2017, versus 23,055 in the year-ago quarter

TROY, Mich., Oct. 17, 2017 (GLOBE NEWSWIRE) — Syntel, Inc. (Nasdaq:SYNT), a leading global provider of integrated information technology and knowledge process services, today announced financial results for the third quarter, ended September 30, 2017.

Third Quarter Financial Highlights

Syntel’s revenue for the third quarter decreased 4.1 percent to $231.3 million from $241.3 million in the prior-year period, and rose two percent from $226.8 million in the second quarter of 2017. During the third quarter, Banking and Financial Services accounted for 44.5 percent of total revenue, with Retail, Logistics and Telecom at 18 percent, Healthcare and Life Sciences at 18 percent, Insurance at 15.3 percent, and Manufacturing at 4.2 percent.

The Company’s gross margin was 38.1 percent in the third quarter, compared to 39.2 percent in the prior-year period and 35.9 percent in the second quarter of 2017. Selling, General and Administrative (SG&A) expenses were 11.7 percent of revenue in the third quarter, compared to 12.2 percent in the prior-year period and 12.7 percent in the previous quarter.

The third quarter income from operations was 26.4 percent of revenue as compared to 27 percent in the prior-year period and 23.3 percent in the second quarter 2017.

Net income for the third quarter was $48.8 million or $0.58 per diluted share. During the third quarter, Syntel had a one-time reversal of approximately $6.3 million in tax provisions, which positively impacted the EPS by $0.07 per share.

This compares to a net loss of $217.2 million or $2.58 per diluted share in the prior-year period and a net income of $36.7 million or $0.44 per diluted share in the second quarter of 2017. During the year-ago quarter, a net loss arose in connection with a special cash dividend and the one-time repatriation of cash for which the Company recognized a one-time tax expense of $271 million (net of foreign tax credits) in the third quarter of 2016, negatively impacting the EPS by $3.21 per share.

During Q3, Syntel spent $2.2 million in CAPEX and finished the quarter with cash and short-term investments of $109 million. The Company ended the quarter with 21,928 employees globally. During the quarter, Syntel repurchased 875,435 shares of its common stock for a total purchase price of $16.1 million.

Operational Highlights

“We continued to deepen our strategic relationships during the third quarter,” said Syntel CEO and President Rakesh Khanna. “In particular, contribution from the 4 to 50 client segment grew faster than the overall company.”

“While we continue to see headwinds in certain areas, the demand for digital services was strong and our Insurance segment continued to post healthy growth,” said Khanna. “We are encouraged by our Q3 results, but there is more work to be done. Our customers are at the center of our universe, and this focus will help Syntel return to growth over time.”

2017 Guidance

Based on current visibility levels and an exchange rate assumption of 65.0 Indian rupees to the dollar, the Company currently expects 2017 revenue of $890 million to $902 million and EPS in the range of $1.81 to $1.88.

Syntel to Host Conference Call

Syntel will discuss its third quarter 2017 results today on a conference call at 10:00 a.m. (EDT). To listen to the call, please dial (877) 837-3915 in the US/Canada or (973) 638-3495 internationally. The call will also be broadcast live via the Internet at Syntel’s web site: investor.syntelinc.com. Please access the site at least 15 minutes prior to the call to register and download any necessary software. A replay will be available until October 24, 2017 by dialing (855) 859-2056 and entering “98749553.” International callers may dial (404) 537-3406 and enter the same passcode.

About Syntel
Syntel (Nasdaq:SYNT) is a leading global provider of integrated information technology and knowledge process services. Syntel helps global enterprises evolve the core by leveraging automation, scaled agile and cloud platforms to build efficient application development and management, testing and infrastructure solutions. Syntel’s digital services enable companies to engage customers, discover new insights through analytics, and create a more connected enterprise through the internet of things. Syntel’s “Customer for Life” philosophy builds collaborative partnerships and creates long-term client value by investing in IP, solutions and industry-focused delivery teams with deep domain knowledge.

To learn more, visit us at www.syntelinc.com.

Safe Harbor Provision
This news release may include forward-looking statements, including those with respect to the future level of business for Syntel, Inc. These statements are necessarily subject to risk and uncertainty. Actual results could differ materially from those projected in these forward-looking statements as a result of certain risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 or from other factors not currently anticipated.

Contacts:
North America/Europe: Jon Luebke, Syntel, 248/619-3503, jon_luebke@syntelinc.com 

                 
  SYNTEL, INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  (UNAUDITED)
  (IN THOUSANDS, EXCEPT PER SHARE DATA)
                 
                 
      THREE MONTHS ENDED   NINE MONTHS ENDED  
      SEPTEMBER 30,   SEPTEMBER 30,  
        2017     2016       2017     2016    
                 
  Net revenues $ 231,340   $ 241,255     $ 684,020   $ 728,663    
  Cost of revenues   143,219     146,672       432,017     453,371    
  Gross profit   88,121     94,583       252,003     275,292    
  Selling, general and administrative expenses   27,160     29,526       86,150     77,468    
                 
  Income from operations   60,961     65,057       165,853     197,824    
                 
  Other income (expense):            
  Interest Expense   (3,041 )   (839 )     (9,633 )   (1,984 )  
  Other income   520     5,066       1,478     15,182    
  Other income (expense), net   (2,521 )   4,227       (8,155 )   13,198    
                 
  Income before provision for income taxes   58,440     69,284       157,698     211,022    
                 
  Income tax expense   9,607     286,513       33,833     316,403    
                 
  Net income/(Loss) $ 48,833   $ (217,229 )   $ 123,865   $ (105,381 )  
                 
  Other Comprehensive Income              
                 
  Foreign currency translation adjustments $ (1,255 ) $ (391 )   $ 5,857   $ (17,725 )  
                 
  Gains on derivatives:            
  Gains arising during period on cash flow hedges   342           633        
                 
  Unrealized gains/(losses) on securities:            
  Unrealized holding gains arising during period   301     170       496     217    
  Reclassification adjustment for gains included in net income   (77 )   (1,931 )     (112 )   (244 )  
        224     (1,761 )     384     (27 )  
                 
  Defined benefit pension plans:            
  Net profit arising during period             6        
  Amortization of prior service cost included in net periodic pension cost   28     12       60     47    
        28     12       66     47    
                 
  Other comprehensive Income (Loss), before tax   (661 )   (2,140 )     6,940     (17,705 )  
  Income tax benefit (expenses) related to Other comprehensive income (loss)   (217 )   659       (396 )   (54 )  
  Other comprehensive Income/(loss), net of tax   (878 )   (1,481 )     6,544     (17,759 )  
                 
  Comprehensive Income/(Loss)   $ 47,955   $ (218,710 )   $ 130,409   $ (123,140 )  
                 
  Dividend Per Share   $   $ 15.00     $   $ 15.00    
                 
  EARNINGS/(LOSS) PER SHARE:            
  Basic $ 0.59   $ (2.58 )   $ 1.48   $ (1.25 )  
  Diluted $ 0.58   $ (2.58 )   $ 1.48   $ (1.25 )  
                 
  Weighted average common shares outstanding:            
                 
  Basic   83,462     84,214       83,692     84,155    
                 
  Diluted   83,537     84,289       83,741     84,278    
                 

 

           
  SYNTEL, INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEETS
  (UNAUDITED)
  (IN THOUSANDS)
      (Unaudited)   (Audited)
      September 30,   December 31,
         2017         2016   
           
           
  ASSETS      
           
  Current assets:      
  Cash and cash equivalents $ 75,417     $ 78,332  
  Short term investments   33,618       21,614  
  Accounts receivable, net of allowance for doubtful accounts of $2,140 at September 30,
 2017 and $801 at December 31, 2016, respectively
  109,341       118,299  
  Revenue earned in excess of billings   26,465       25,039  
  Other current assets   30,213       36,306  
           
  Total current assets   275,054       279,590  
           
  Property and equipment   236,955       227,056  
  Less  accumulated depreciation and amortization   131,855       120,580  
           
  Property and equipment, net   105,100       106,476  
           
  Goodwill   906       906  
           
  Non current Term Deposits with Banks   389       225  
           
           
  Deferred income taxes and other non current assets   79,581       67,346  
           
  TOTAL ASSETS $    461,030     $    454,543  
           
  LIABILITIES AND SHAREHOLDERS’ (DEFICIT)/EQUITY      
  LIABILITIES      
  Current liabilities:      
  Accrued payroll and related costs $ 51,339     $ 56,650  
  Income taxes payable   18,721       15,195  
  Accounts payable and other current liabilities   33,177       31,559  
  Deferred revenue   3,432       7,973  
  Loans and borrowings   26,090       21,264  
           
  Total current liabilities   132,759       132,641  
           
  Deferred income taxes and other non current liabilities     29,992       26,373  
  Non Current loans and borrowings     361,895       478,616  
           
  TOTAL LIABILITIES   524,646       637,630  
           
  SHAREHOLDERS’ EQUITY      
           
           
  Total shareholders’ (deficit)/equity   (63,616 )     (183,087 )
           
  TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT)/EQUITY $    461,030     $    454,543