Syntel Reports Fourth Quarter and Full Year 2017 Financial Results

Highlights:

  • Q4 revenue of $239.8M, up 0.8% from year-ago quarter, and 3.7% sequentially
  • Q4 EPS of $0.51 per diluted share as compared to $0.57 in the year-ago quarter and $0.58 in the third quarter. Q4 EPS was negatively impacted by approximately $0.11 due to one-time tax provisions.
  • Full year 2017 revenue of $923.8M as compared to $966.6M in the prior-year
  • Full year 2017 EPS of $1.99 as compared to a loss per share of $0.68 in the prior-year. Full year 2016 EPS was negatively impacted by $3.21 per share of one-time tax expense associated with a repatriation of cash.
  • 2017 year-ending cash & short term investments of $122.5M
  • Global Headcount of 22,114 on December 31, 2017, versus 23,011 in the year-ago quarter

TROY, Mich., Feb. 15, 2018 (GLOBE NEWSWIRE) — Syntel, Inc. (Nasdaq:SYNT), a leading global provider of integrated information technology and knowledge process services, today announced financial results for the fourth quarter and full year, ended December 31, 2017.

Fourth Quarter Financial Highlights
Syntel’s revenue for the fourth quarter increased 0.8 percent to $239.8 million from $237.9 million in the prior-year period, and 3.7 percent from $231.3 million in the third quarter of 2017.  During the fourth quarter, Banking and Financial Services accounted for 44.4 percent of total revenue, with Healthcare and Life Sciences at 18.2 percent, Retail, Logistics and Telecom at 17.3 percent, Insurance at 15.6 percent, and Manufacturing at 4.5 percent.

The Company’s gross margin was 41.3 percent in the fourth quarter, compared to 40.2 percent in the prior-year period and 38.1 percent in the third quarter of 2017.  Selling, General and Administrative (SG&A) expenses were 12.2 percent of revenue in the fourth quarter, compared to 13.1 percent in the prior-year period and 11.7 percent in the previous quarter.

The fourth quarter income from operations was 29.1 percent of revenue as compared to 27.1 percent in the prior-year period and 26.4 percent in the third quarter of 2017.

Net income for the fourth quarter was $42.4 million or $0.51 per diluted share, compared to $48 million or $0.57 per diluted share in the prior-year period and $48.8 million or $0.58 per diluted share in the third quarter of 2017. During the fourth quarter, following the enactment of the Tax Cuts and Jobs Act, Syntel had a one-time impact of approximately $9 million in tax provisions, of which approximately $8 million was related to a repatriation of cash and $1 million was due to an adjustment of deferred tax assets. The combined impact of these provisions reduced fourth quarter EPS by $0.11 per share.

The Company spent $0.1 million to repurchase 5,000 shares of common stock during the fourth quarter.

Full Year 2017 Financial Highlights
Revenue for 2017 decreased 4.4 percent to $923.8 million, from $966.6 million in 2016. The Company’s 2017 operating margin was 25.5 percent, compared to 27.1 percent in 2016. Net income for the year was $166.3 million or $1.99 per share. This compares to a net loss of $57.4 million or $0.68 per diluted share in 2016.  

During 2017, Syntel spent $8.6 million in CAPEX, largely in support of its global facilities and infrastructure, and finished the year with cash and short-term investments of $122.5 million. The Company spent $16.2 million to repurchase 880,435 shares of common stock. Syntel added 16 new clients during the year and ended 2017 with 22,114 employees globally.

Operational Highlights
“I am pleased with our Q4 results and the solid progress we made in strengthening our position at our top 50 customer accounts during 2017,” said Syntel CEO and President Rakesh Khanna. “Our teams have worked diligently to fortify our client relationships, and to identify and close new opportunities.”

“In 2018, we will continue to invest in client engagement and in developing innovative digital and automation-powered services to help our customers transform their businesses and adapt to a dynamic competitive environment,” said Khanna. “We still have some work to do, but I am confident that our customer–centric approach will help Syntel make steady progress as we diversify and grow with our customers.”

2018 Guidance
Based on current visibility levels and an exchange rate assumption of 64 Indian rupees to the dollar, the Company currently expects 2018 revenue of $905 million to $950 million and EPS in the range of $1.72 to $1.92.

Syntel to Host Conference Call
Syntel will discuss its fourth quarter 2017 results today on a conference call at 10:00 a.m. (EST). 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 February 22, 2018 by dialing (855) 859-2056 and entering “4299607.” 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 September 30, 2017 or from other factors not currently anticipated.

           
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
           
  THREE MONTHS ENDED   TWELVE MONTHS ENDED
  DECEMBER 31,   DECEMBER 31,
    2017     2016       2017     2016  
           
Net revenues $ 239,808   $ 237,887     $ 923,828   $ 966,550  
Cost of revenues   140,772     142,354       572,789     595,725  
Gross profit   99,036     95,533       351,039     370,825  
Selling, general and administrative expenses   29,173     31,060       115,323     108,528  
           
Income from operations   69,863     64,473       235,716     262,297  
           
Other income (expense), net:          
Interest Expense   (2,994 )   (2,724 )     (12,627 )   (4,708 )
Other income   918     614       2,396     15,796  
Other income (expense), net   (2,076 )   (2,110 )     (10,231 )   11,088  
           
Income before provision for income taxes   67,787     62,363       225,485     273,385  
           
Income tax expense   25,384     14,372       59,217     330,775  
           
Net income (Loss) $ 42,403   $ 47,991     $ 166,268   $ (57,390 )
           
Other Comprehensive Income (Loss)          
           
Foreign currency translation adjustments $ 3,957   $ (1,293 )   $ 9,814   $ (19,018 )
Gains on derivatives:          
Gains arising during period on cash flow hedges   2,141     533       2,774     533  
           
Unrealized gains (Loss) on securities:          
Unrealized holding gains arising during period   209     179       387     242  
Reclassification adjustment for gains included in net income   (321 )   (158 )     (115 )   (248 )
    (112 )   21       272     (6 )
           
Defined benefit pension plans:          
Net Profit (Loss) arising during period   1,678     (802 )     1,684     (802 )
Amortization of prior service cost included in net periodic pension cost   16     (82 )     76     (35 )
    1,694     (884 )     1,760     (837 )
           
Other comprehensive Income (Loss), before tax   7,680     (1,623 )     14,620     (19,328 )
Income tax (expense) benefits related to Other Comprehensive Loss   (960 )   86       (1,356 )   32  
Other comprehensive Income (Loss), net of tax   6,720     (1,537 )     13,264     (19,296 )
           
Comprehensive Income (Loss) $ 49,123   $ 46,454     $ 179,532   $ (76,686 )
           
Dividend Per Share $   $     $   $ 15.00  
           
EARNINGS/(LOSS) PER SHARE:          
Basic $ 0.51   $ 0.57     $ 1.99   $ (0.68 )
Diluted $ 0.51   $ 0.57     $ 1.99   $ (0.68 )
           
Weighted average common shares outstanding:          
           
Basic   83,073     84,117       83,537     84,146  
           
Diluted   83,248     84,163       83,618     84,146  
           

 

       
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
       
  December 31,   December 31,
  2017   2016
ASSETS      
Current assets:      
Cash and cash equivalents $ 95,994     $ 78,332  
Short term investments   26,501       21,614  
Accounts receivable, net of allowance for doubtful accounts of $ Nil at December 31, 2017 and $801 at December 31, 2016, respectively   115,052       118,299  
Revenue earned in excess of billings   24,995       25,039  
Other current assets   29,484       36,306  
       
Total current assets   292,026       279,590  
       
Property and equipment   240,948       227,056  
Less  accumulated depreciation and amortization   134,650       120,580  
       
Property and equipment, net   106,298       106,476  
       
Goodwill   906       906  
       
Non current Term Deposits with Banks   396       225  
       
       
Deferred income taxes and other non current assets   84,090       67,346  
       
TOTAL ASSETS $    483,716     $    454,543  
       
LIABILITIES AND SHAREHOLDERS’ (DEFICIT)/EQUITY      
LIABILITIES      
Current liabilities:      
Accrued payroll and related costs $ 51,497     $ 56,650  
Income taxes payable   21,100       15,195  
Accounts payable and other current liabilities   34,762       31,559  
Deferred revenue   3,240       7,973  
Loans and borrowings   24,268       21,264  
       
Total current liabilities   134,867       132,641  
       
Deferred income taxes and other non current liabilities   27,325       26,373  
Non Current loans and borrowings   334,446       478,616  
       
TOTAL LIABILITIES   496,638       637,630  
       
SHAREHOLDERS’ EQUITY      
       
       
Total shareholders’ (deficit)/equity   (12,922 )     (183,087 )
       
TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT)/EQUITY $    483,716     $    454,543  
       

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