SYNT
$41.47
Syntel
($.18)
(.43%)
Earnings Details
2nd Quarter June 2016
Thursday, July 21, 2016 8:30:21 AM
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Summary

Syntel Beats but Guides Lower

Syntel (SYNT) reported 2nd Quarter June 2016 earnings of $0.70 per share on revenue of $246.0 million. The consensus earnings estimate was $0.63 per share on revenue of $249.1 million. The Earnings Whisper number was $0.67 per share. Revenue grew 2.6% on a year-over-year basis.

The company said it now expects 2016 earnings of $2.55 to $2.70 per share on revenue of $980.0 million to $1.01 billion. The company's previous guidance was earnings of $2.55 to $2.80 per share on revenue of $1.01 billion to $1.04 billion and the current consensus earnings estimate is $2.71 per share on revenue of $1.02 billion for the year ending December 31, 2016.

Syntel Inc along with its subsidiaries is engaged in providing digital transformation, information technology, and knowledge process outsourcing services. Its services include programming, systems integration, outsourcing and overall project management.

Results
Reported Earnings
$0.70
Earnings Whisper
$0.67
Consensus Estimate
$0.63
Reported Revenue
$246.0 Mil
Revenue Estimate
$249.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

Syntel, Inc. (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 (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(TM) by building agile, efficient technology infrastructures that blend legacy business models with disruptive digital innovations. Syntel’s recursive automation platform, SyntBots(R), 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

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