Syntel, Inc.
Oct 17, 2017
PDF

Syntel Reports Third Quarter 2017 Financial Results

Highlights:

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