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Syntel Reports Third Quarter 2012 Financial Results

Highlights:

  • Q3 revenue of $186.4M, up 11% from year-ago quarter, and 4% sequentially
  • Q3 EPS of $1.23 per diluted share, up 96% from year-ago quarter, and 19% sequentially
  • Q3 cash and short term investments of $422.1M
  • Global Headcount of 20,192 on September 30, 2012, up 10% versus prior year

TROY, Mich., Oct. 18, 2012 (GLOBE NEWSWIRE) -- Syntel, Inc. (Nasdaq:SYNT), a global information technology services and Knowledge Process Outsourcing (KPO) company today announced financial results for the third quarter, ended September 30, 2012.

Third Quarter Financial Highlights

Syntel's revenue for the third quarter increased 11 percent to $186.4 million, compared to $167.6 million in the prior-year period, and increased four percent sequentially from $179 million in the second quarter of 2012. During the third quarter, Applications Outsourcing accounted for 75 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 15 percent, e-Business contributing eight percent and TeamSourcing at two percent.

The Company's gross margin was 45.5 percent in the third quarter, compared to 39.8 percent in the prior-year period and 41.3 percent in the second quarter of 2012. Selling, General and Administrative (SG&A) expenses were 15.6 percent of revenue in the third quarter, compared to 21.9 percent in the prior-year period and 10.6 percent in the previous quarter.

The third quarter income from operations was 29.9 percent of revenue as compared to 17.9 percent in the prior-year period and 30.7 percent in the second quarter. The sequential decline in operating margin primarily reflects the impact of currency-related balance sheet translations and, to a lesser extent, costs arising from a customer event and facility-related improvements.

Net income for the third quarter was $51.5 million or $1.23 per diluted share, compared to $26.2 million or $0.63 per diluted share in the prior-year period and net income of $43.4 million or $1.04 per diluted share in the second quarter of 2012.

During Q3, Syntel spent $11.3 million in CAPEX, largely in support of campus infrastructure, and finished the quarter with cash and short-term investments of $422.1 million. The Company also added 132 net employees, ending the quarter with 20,192 employees globally.

Operational Highlights

"Our third quarter results reflect a continued focus on delivering differentiated domain-led offerings, and our dedication to providing real solutions to our customers," said Syntel CEO and President Prashant Ranade. "Amid ongoing global economic headwinds, our commitment to our customers and to delivering innovation continues to present us with new opportunities to provide thought leadership in the markets we serve."

"During the quarter, we saw growth across our verticals that will support our aim to grow faster than the market overall, bolstered by investments in our capabilities," said Ranade. "Technology has become the language of business and we expect to be fluent in the kinds of capabilities that will enable this growth."

"The complexity of our customers' business environment is rising. Our responsiveness coupled with an innovative approach to providing solutions will allow us to differentiate ourselves while we build on the strong relationships we enjoy."

2012 Guidance

Based on current visibility levels and an exchange rate assumption of 52.70 Indian Rupees to the dollar, the Company currently expects 2012 revenue of $730 to $735 million and EPS in the range of $4.36 to $4.40.

Syntel to Host Conference Call

Syntel will discuss its third quarter 2012 results today on a conference call at 10:00 a.m. (EDT). To listen to the call, please dial (877) 837-3915 in the U.S./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 25, 2012 by dialing (855) 859-2056 and entering "39646088." 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 Outsourcing (KPO) solutions spanning the entire lifecycle of business and information systems and processes. The Company is driven by its mission to create new opportunities for clients by harnessing the passion, talent and innovation of Syntel employees worldwide. Syntel leverages dedicated Centers of Excellence, a flexible Global Delivery Model, and a strong track record of building collaborative client partnerships to create sustainable business advantage for Global 2000 organizations. Syntel is assessed at SEI CMMi Level 5, and is ISO 27001 and ISO 9001:2008 certified. As of September 30, 2012, Syntel employed more than 20,000 people worldwide. To learn more, visit us at: www.syntelinc.com.

Safe Harbor Provision

This news release includes 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, 2011, the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 or from other factors not currently anticipated.

SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
2012 2011 2012 2011
Net revenues $ 186,407 $ 167,627 $ 536,130 $ 469,984
Cost of revenues 101,588 100,893 306,001 295,653
Gross profit 84,819 66,734 230,129 174,331
Selling, general and administrative expenses 29,036 36,679 74,913 89,083
Income from operations 55,783 30,055 155,216 85,248
Other income, principally interest 9,964 1,632 20,708 13,674
Income before income taxes 65,747 31,687 175,924 98,922
Income tax expense 14,265 5,480 40,308 20,026
Net income $ 51,482 $ 26,207 $ 135,616 $ 78,896
Other Comprehensive Income(Loss)
Foreign currency translation adjustments 35,877 (37,810) 6,439 (36,482)
Gains and (losses) on derivatives
Gains and (losses) arising during period on net investment hedges 1,061 (2,401) (1,234) (1,260)
Unrealized gains(losses) on securities:
Unrealized holding gains arising during period 758 328 916 364
Reclassification adjustment for gains included in net income (213) (45) (159) (464)
545 284 757 (100)
Defined benefit pension plans:
Net Profit(loss) arising during period (9) 38 (13) 8
Amortization of prior service cost included in net periodic pension cost 8 -- 24 29
(1) 38 11 37
Other comprehensive income(loss), before tax 37,482 (39,890) 5,973 (37,805)
Income tax (expenses) benefit related to Other Comprehensive Income(loss) (174) (103) (241) (20)
Other comprehensive income(loss), net of tax 37,308 (39,993) 5,732 (37,825)
Comprehensive Income(Loss) 88,790 (13,786) 141,348 41,071
Dividend per share $ 0.06 $ 0.06 $ 0.18 $ 0.18
EARNINGS PER SHARE:
Basic $ 1.23 $ 0.63 $ 3.25 $ 1.90
Diluted $ 1.23 $ 0.63 $ 3.25 $ 1.89
Weighted average common shares outstanding:
Basic 41,720 41,640 41,683 41,608
Diluted 41,802 41,724 41,780 41,710
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
September 30,
2012
December 31,
2011
ASSETS
Current assets:
Cash and cash equivalents $ 86,675 $ 104,628
Short term investments 335,399 215,798
Accounts receivable, net of allowance for doubtful accounts of $2,036 and $2,407 at September 30 , 2012 and December 31, 2011, respectively 89,958 88,573
Revenue earned in excess of billings 17,299 5,131
Deferred income taxes and other current assets 58,315 46,353
Total current assets 587,646 460,483
Property and equipment 202,388 179,576
Less accumulated depreciation and amortization 84,756 73,574
Property and equipment, net 117,632 106,002
Goodwill 906 906
Non current Term Deposits with Banks 14 130
Deferred income taxes and other non current assets 30,602 29,727
TOTAL ASSETS $ 736,800 $ 597,248
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accrued payroll and related costs $ 44,767 $ 45,949
Income taxes payable 9,008 3,080
Accounts payable and other current liabilities 35,624 35,341
Deferred revenue 5,317 9,692
Total current liabilities 94,716 94,062
Other non current liabilities 11,672 9,997
Total liabilities 106,388 104,059
SHAREHOLDERS' EQUITY
Total shareholders' equity 630,412 493,189
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 736,800 $ 597,248
CONTACT: North America/Europe: Jon Luebke Syntel 248/619-3503 jon_luebke@syntelinc.com Asia/Pacific: Sikta Samantaray +91 9167512186 sikta_samantaray@syntelinc.com

Source:Syntel, Inc.