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Syntel Reports Second Quarter 2016 Financial Results

Highlights:

• Q2 revenue of $246M, up 3% from year-ago quarter, and 2% sequentially
• Q2 EPS of $0.70 per diluted share, down 3% from year-ago quarter, and up 11% sequentially
• Q2 cash & short term investments of $1.1B
• Global Headcount of 23,773 on June 30, 2016, versus 23,006 in the year ago quarter

TROY, Mich., July 21, 2016 (GLOBE NEWSWIRE) -- Syntel, Inc. (Nasdaq:SYNT), a global provider of digital transformation, information technology and knowledge process services to Global 2000 companies, today announced financial results for the second quarter, ended June 30, 2016.

Second Quarter Financial Highlights

Syntel's revenue for the second quarter increased three percent to $246 million from $239.8 million in the prior-year period, and two percent from $241.4 million in the first quarter of 2016. During the second quarter, Banking and Financial Services accounted for 48.9 percent of total revenue, with Retail, Logistics and Telecom at 16.9 percent, Healthcare and Life Sciences at 16.3 percent, Insurance at 13.1 percent, and Manufacturing at 4.8 percent.

The Company's gross margin was 37 percent in the second quarter, compared to 38 percent in the prior-year period and 37.2 percent in the first quarter of 2016. Selling, General and Administrative (SG&A) expenses were 7.4 percent of revenue in the second quarter, compared to 9.1 percent in the prior-year period and 12.3 percent in the previous quarter.

The second quarter income from operations was 29.6 percent of revenue as compared to 28.9 percent in the prior-year period and 24.9 percent in the first quarter. The sequential rise in operating margin during the second quarter primarily reflects the favorable impact of currency-related balance sheet translations, which was partially offset by immigration expenses and offshore wage increases.

Net income for the second quarter was $58.8 million or $0.70 per diluted share, compared to $60.6 million or $0.72 per diluted share in the prior-year period and net income of $53.1 million or $0.63 in the first quarter of 2016.

During Q2, Syntel spent $5.7 million in CAPEX, largely in support of campus infrastructure, and finished the quarter with cash and short-term investments of $1.1 billion. The Company ended the quarter with 23,773 employees globally.

Operational Highlights

"I was pleased to see sequential improvement in the insurance segment as we focused on converting our pipelines,” said Syntel CEO and President Nitin Rakesh. "Parts of this segment are still recovering; however, we continue to anticipate improving growth for insurance later this year. While we made steady progress this quarter, we are seeing added uncertainty which is contributing to volatility in customer spending. We are adjusting our outlook to reflect this."

"Our customers across every industry are investing in transformation to gain competitive advantage, but they continue to struggle with high costs and latencies inherent in aging systems and applications that are prevalent across Global 2000 organizations," said Rakesh.

"Syntel’s digital modernization solution powered by our SyntBots recursive automation platform offers a robust combination of technology and services to help our customers execute and fund their strategic initiatives, thereby mitigating impediments to growth and business agility."

2016 Guidance

Based on current visibility levels and an exchange rate assumption of 67 Indian rupees to the dollar, the Company currently expects 2016 revenue of $980 million to $1,010 million and EPS in the range of $2.55 to $2.70.

Syntel to Host Conference Call

Syntel will discuss its second quarter 2016 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 July 28, 2016 by dialing (855) 859-2056 and entering “48344679". International callers may dial (404) 537-3406 and enter the same passcode.

About Syntel
Syntel (Nasdaq:SYNT) is the global leader in digital modernization services, with a core suite of automation-driven IT and knowledge process services. Syntel helps global enterprises thrive in the Two-Speed World™ by building agile, efficient technology infrastructures that blend legacy business models with disruptive digital innovations. Syntel’s recursive automation platform, SyntBots®, enables clients to manage, migrate, and modernize their business and technology ecosystems. Syntel believes in a "Customer for Life" philosophy to build collaborative partnerships and creates long-term business value for its clients 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, 2015, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 or from other factors not currently anticipated.

SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2016 2015 2016 2015
Net revenues$246,018 $239,797 $487,408 $460,396
Cost of revenues 155,033 148,704 306,699 290,489
Gross profit 90,985 91,093 180,709 169,907
Selling, general and administrative expenses 18,265 21,728 47,942 57,110
Income from operations 72,720 69,365 132,767 112,797
Other income, net 4,875 9,887 8,971 19,225
Income before provision for income taxes 77,595 79,252 141,738 132,022
Income tax expense 18,804 18,673 29,890 31,422
Net income$58,791 $60,579 $111,848 $100,600
Other Comprehensive Income
Foreign currency translation adjustments $(16,094)$(16,546) $(17,334)$(5,920)
Unrealized gains/(losses) on securities:
Unrealized holding gains arising during period 970 2,413 1,803 5,178
Reclassification adjustment for gains included in net income (1,130) (1,712) (69) (2,905)
(160) 701 1,734 2,273
Defined benefit pension plans:
Net profit arising during period - - - -
Amortization of prior service cost included in net periodic pension cost 19 34 35 59
19 34 35 59
Other comprehensive loss, before tax (16,235) (15,811) (15,565) (3,588)
Income tax benefit (expenses) related to Other comprehensive income (loss) 22 (547) (713) (1,033)
Other comprehensive loss, net of tax (16,213) (16,358) (16,278) (4,621)
Comprehensive Income $42,578 $44,221 $95,570 $95,979
EARNINGS PER SHARE:
Basic $0.70 $0.72 $1.33 $1.20
Diluted $0.70 $0.72 $1.33 $1.20
Weighted average common shares outstanding:
Basic 84,140 83,936 84,126 83,922
Diluted 84,278 84,135 84,272 84,131

SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)(Audited)
June 30,December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents$702,446 $500,499
Short term investments 395,385 540,045
Accounts receivable, net of allowance for doubtful accounts of $619 at June 30, 2016 and $622 at December 31, 2015, respectively 127,605 136,926
Revenue earned in excess of billings 37,240 30,448
Deferred income taxes and other current assets 50,977 44,575
Total current assets 1,313,653 1,252,493
Property and equipment 224,036 217,922
Less accumulated depreciation and amortization 116,553 112,146
Property and equipment, net 107,483 105,776
Goodwill 906 906
Non current Term Deposits with Banks 227 77
Deferred income taxes and other non current assets 63,867 64,018
TOTAL ASSETS$ 1,486,136 $ 1,423,270
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accrued payroll and related costs$51,689 $60,339
Income taxes payable 16,235 11,305
Accounts payable and other current liabilities 40,983 37,892
Deferred revenue 4,050 7,716
Loans and borrowings 12,725 129,981
Total current liabilities 125,682 247,233
Other non current liabilities 18,359 17,592
Non Current loans and borrowings 84,375 -
TOTAL LIABILITIES 228,416 264,825
SHAREHOLDERS' EQUITY
Total shareholders' equity 1,257,720 1,158,445
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$ 1,486,136 $ 1,423,270


Contacts: North America/Europe: Jon Luebke, Syntel, 248/619-3503, jon_luebke@syntelinc.com Europe and International: Rani Gill, Flame PR, +44 0203 357 9746, Syntel@flamepr.com

Source:Syntel, Inc.