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Syntel Reports Third Quarter 2016 Financial Results

Highlights:

  • Q3 revenue of $241M, down 5% from year-ago quarter, and 2% sequentially
  • Q3 loss per share of $2.58 as compared to EPS of $0.92 in the year-ago quarter, and $0.70 in the prior quarter. Q3 2016 EPS was negatively impacted by $3.21 per share of one-time tax expense associated with a one-time repatriation of cash.
  • Q3 cash & short term investments of $88.4M
  • Global Headcount of 23,055 on September 30, 2016, versus 23,814 in the year ago quarter

TROY, Mich., Oct. 20, 2016 (GLOBE NEWSWIRE) -- Syntel, Inc. (Nasdaq:SYNT), a global leader in digital modernization, information technology and knowledge process services for Global 2000 companies, today announced financial results for the third quarter, ended September 30, 2016.

Third Quarter Financial Highlights

Syntel's revenue for the third quarter decreased five percent to $241.3 million from $253.6 million in the prior-year period, and two percent from $246 million in the second quarter of 2016. During the third quarter, Banking and Financial Services accounted for 48.1 percent of total revenue, with Retail, Logistics and Telecom at 17.2 percent, Healthcare and Life Sciences at 16.4 percent, Insurance at 13.7 percent, and Manufacturing at 4.6 percent.

The Company's gross margin was 39.2 percent in the third quarter, compared to 42.4 percent in the prior-year period and 37 percent in the second quarter of 2016. Selling, General and Administrative (SG&A) expenses were 12.2 percent of revenue in the third quarter, compared to 6 percent in the prior-year period and 7.4 percent in the previous quarter.

The third quarter income from operations was 27 percent of revenue as compared to 36.5 percent in the prior-year period and 29.6 percent in the second quarter. The sequential decline in operating margin during the third quarter primarily reflects the unfavorable impact of currency-related balance sheet translations, which was partially offset by lower immigration expenses.

In connection with a special cash dividend and the one-time repatriation of cash announced on September 12, the Company recognized a one-time tax expense of $271 million (net of foreign tax credits) in the third quarter of 2016. As a result, net loss for the third quarter was $217.2 million or $2.58 per diluted share, compared to net income of $77.7 million or $0.92 per diluted share in the prior-year period and $58.8 million or $0.70 in the second quarter of 2016.

During Q3, Syntel spent $6.2 million in CAPEX, largely in support of campus infrastructure, and finished the quarter with cash and short-term investments of $88.4 million. The Company ended the quarter with 23,055 employees globally.

Operational Highlights

"Market conditions were challenging during the third quarter as macroeconomic, business and regulatory uncertainty impacted customer spending in what is typically a seasonally strong period,” said Syntel CEO and President Nitin Rakesh. "Despite this, we continued to see some signs of stabilization in our insurance segment, including in the personal lines sub-industry."

"Syntel is unwavering in its strategic focus on becoming the global leader in digital modernization. A strong deal pipeline and favorable customer response to our comprehensive offerings in this area give us confidence that our growth trajectory will improve as near-term headwinds abate," said Rakesh.

"During the third quarter our Board declared a special cash dividend of $15 a share, returning considerable value to our shareholders. This decision underscores conviction in our financial and operational strength and in our ability to execute on our strategic focus."

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 $960 million to $970 million and loss per share in the range of $0.65 to $0.75.

CFO Appointment

On October 17, 2016, the Board of Directors of Syntel named Anil Agrawal as Chief Financial Officer and Chief Information Security Officer, effective November 1, 2016. Mr. Agrawal, age 39, has been Acting Chief Financial Officer since November 2015 and has been with Syntel since 2001. Mr. Agrawal was previously a General Manager of Finance for Syntel and served as Head of Finance for the Company’s India operations from 2007 through December 2011 and Head of Corporate Financial Planning and Analytics from January 2012 to November 2015.

Syntel to Host Conference Call

Syntel will discuss its third 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 October 27, 2016 by dialing (855) 859-2056 and entering “97795475". 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 June 30, 2016 or from other factors not currently anticipated.

SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2016 2015 2016 2015
Net revenues $241,255 $253,636 $728,663 $714,032
Cost of revenues 146,672 146,061 453,371 436,550
Gross profit 94,583 107,575 275,292 277,482
Selling, general and administrative expenses 29,526 15,121 77,468 72,231
Income from operations 65,057 92,454 197,824 205,251
Other income, net 4,227 10,227 13,198 29,452
Income before provision for income taxes 69,284 102,681 211,022 234,703
Income tax expense 286,513 24,990 316,403 56,412
Net (Loss)/Income $(217,229)$77,691 $(105,381)$178,291
Other Comprehensive (Loss)/Income
Foreign currency translation adjustments $(391)$(34,012) $(17,725)$(39,932)
Unrealized gains (Loss) on securities:
Unrealized holding gains arising during period 170 1,477 217 4,769
Reclassification adjustment for gains included in net income (1,931) (3,341) (244) (4,360)
(1,761) (1,864) (27) 409
Defined benefit pension plans:
Net Profit (Loss) arising during period - - - -
Amortization of prior service cost included in net periodic pension cost 12 37 47 96
12 37 47 96
Other comprehensive (loss) before tax (2,140) (35,839) (17,705) (39,427)
Income tax benefit (expenses) related to Other Comprehensive (loss)/income 659 461 (54) (572)
Other comprehensive (loss), net of tax (1,481) (35,378) (17,759) (39,999)
Comprehensive (Loss)/Income $(218,710)$42,313 $(123,140)$138,292
Dividend Per Share $15.00 - $15.00 -
(LOSS)/EARNINGS PER SHARE:
Basic $(2.58)$0.92 $(1.25)$2.12
Diluted $(2.58)$0.92 $(1.25)$2.12
Weighted average common shares outstanding:
Basic 84,214 84,005 84,155 83,950
Diluted 84,289 84,131 84,278 84,131

SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)(Audited)
September 30,December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $65,244 $500,499
Short term investments 23,150 540,045
Accounts receivable, net of allowance for doubtful accounts of $663 at September 30, 2016 and $622 at December 31, 2015, respectively 113,077 136,926
Revenue earned in excess of billings 32,711 30,448
Advance to transfer agent for dividend payout 1,261,500 -
Deferred income taxes and other current assets 36,442 44,575
Total current assets 1,532,124 1,252,493
Property and equipment 230,653 217,922
Less accumulated depreciation and amortization 120,732 112,146
Property and equipment, net 109,921 105,776
Goodwill 906 906
Non current Term Deposits with Banks 229 77
Deferred income taxes and other non current assets 61,935 64,018
TOTAL ASSETS $ 1,705,115 $ 1,423,270
LIABILITIES AND SHAREHOLDERS' (DEFICIT)/EQUITY
LIABILITIES
Current liabilities:
Accrued payroll and related costs $55,649 $60,339
Income taxes payable 60,377 11,305
Accounts payable and other current liabilities 39,065 37,892
Deferred revenue 3,189 7,716
Loans and borrowings 15,131 129,981
Dividends payable 1,261,500 -
Total current liabilities 1,434,911 247,233
Other non current liabilities 26,707 17,592
Non Current loans and borrowings 464,190 -
TOTAL LIABILITIES 1,925,808 264,825
SHAREHOLDERS' (DEFICIT)/EQUITY
Total shareholders' (Deficit)/Equity (220,693) 1,158,445
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)/EQUITY $ 1,705,115 $ 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.