Syntel Reports Third Quarter 2016 Financial Results
-- 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
Syntel, Inc. (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
Syntels 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 Companys 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.
"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."
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.
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 Companys 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 Syntels 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.
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. Syntels 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 Companys Annual Report on Form 10-K for the year ended December 31, 2015, the Companys 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
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
NINE MONTHS ENDED
Cost of revenues
Selling, general and administrative expenses
Income from operations
Other income, net
Income before provision for income taxes
Income tax expense
Other Comprehensive (Loss)/Income
Foreign currency translation adjustments
Unrealized gains (Loss) on securities:
Unrealized holding gains arising during period
Reclassification adjustment for gains included in net income
Defined benefit pension plans:
Net Profit (Loss) arising during period
Amortization of prior service cost included in net periodic pension cost
Other comprehensive (loss) before tax
Income tax benefit (expenses) related to Other Comprehensive (loss)/income
Other comprehensive (loss), net of tax
Dividend Per Share
(LOSS)/EARNINGS PER SHARE:
Weighted average common shares outstanding:
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents
Short term investments
Accounts receivable, net of allowance for doubtful accounts of $663 at September 30, 2016 and $622 at December 31, 2015, respectively
Revenue earned in excess of billings
Advance to transfer agent for dividend payout
Deferred income taxes and other current assets
Total current assets
Property and equipment
Less accumulated depreciation and amortization
Property and equipment, net
Non current Term Deposits with Banks
Deferred income taxes and other non current assets
LIABILITIES AND SHAREHOLDERS (DEFICIT)/EQUITY
Accrued payroll and related costs
Income taxes payable
Accounts payable and other current liabilities
Loans and borrowings
Total current liabilities
Other non current liabilities
Non Current loans and borrowings
Total shareholders (Deficit)/Equity
TOTAL LIABILITIES AND SHAREHOLDERS (DEFICIT)/EQUITY
North America/Europe: Jon Luebke, Syntel, 248/619-3503, firstname.lastname@example.org
Europe and International: Rani Gill, Flame PR, +44 0203 357 9746, Syntel@flamepr.com
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