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Syntel (SYNT) Reports Second Quarter 2010 Financial Results

Press Release Source: Syntel, Inc. On Thursday July 22, 2010, 8:30 am EDT

Highlights:

  • Q2 revenue of $130.6M, up 31% from year-ago quarter and 13% percent sequentially
  • Q2 EPS of $0.68 per diluted share, up 11% from year-ago quarter and up 13% sequentially
  • Q2 cash & short term investments of $221.5M
  • Global Headcount of 14,926 as of June 30, 2010

TROY, Mich., July 22, 2010 (GLOBE NEWSWIRE) — Syntel, Inc. (Nasdaq:SYNTNews), a global information technology services and Knowledge Process Outsourcing (KPO) firm, today announced financial results for the second quarter, ended June 30, 2010.

Second Quarter Financial Highlights

Syntel’s revenue for the second quarter increased 31 percent to $130.6 million, compared to $100.1 million in the prior-year period, and increased 13 percent sequentially from $116.0 million in the first quarter of 2010. Revenue growth was broad-based across both verticals and IT service offerings. During the second quarter, Applications Outsourcing accounted for 76 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 14 percent, e-Business contributing seven percent and TeamSourcing at three percent.

The Company’s gross margin was 39.5 percent in the second quarter, compared to 48.2 percent in the prior-year period and 42.4 percent in the first quarter of 2010. Selling, General and Administrative (SG&A) expenses were 14.6 percent in the second quarter, compared to 20.8 percent in the prior-year period and 19.2 percent in the previous quarter. Syntel’s income from operations was 24.8 percent in the second quarter as compared to 27.4 percent in the prior-year period and 23.3 percent in the first quarter of 2010.

Syntel’s gross and operating margins in the second quarter were pressured by the impact of offshore wage increases and the renegotiation of a large client contract. SG&A expenses were reduced by $1.7M during the quarter and $3.6M sequentially due to exchange rate variations.

Net income for the second quarter was $28.3 million or $0.68 per diluted share, compared to $25.1 million or $0.61 per diluted share in the prior-year period and net income of $25.1 million or $0.60 per diluted share in the first quarter of 2010.

Operational Highlights

“Syntel’s second quarter financial results highlight the improving demand environment for offshore services and Syntel’s ability to add value to our clients,” said Syntel CEO and President Prashant Ranade. “Demand for cost reduction services continued to be robust during the quarter, and revenue momentum was accelerated by increased spending for strategic development initiatives.”

“During the second quarter, Syntel was pleased to announce that we were able to finalize negotiations regarding our KPO joint venture,” said Ranade. “From a demand standpoint, our pipeline is extremely healthy and the opportunity for new business expansion is robust. As a result, Syntel added over 1,200 employees in Q2. In preparation for continued growth, we also celebrated the inauguration of our new campus in Chennai during the quarter. The Company remains focused on the long-term business opportunity, and will continue to invest in new services, depth and breadth of skills and world-class infrastructure.”

2010 Guidance

Based on current visibility levels and an exchange rate assumption of 46.5 rupees to the dollar, the Company currently expects 2010 revenue of $510 to $522 million and EPS in the range of $2.50 to $2.60.

Syntel to Host Conference Call

Syntel will discuss its second quarter 2010 results today on a conference call at 10:00 a.m. (Eastern). To listen to the call, please dial (877) 665-2445 in the US/Canada or (408) 427-3788 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 29, 2010 by dialing (800) 642-1687 and entering “88460450”. International callers may dial (706) 645-9291 and enter the same passcode.

About Syntel

Syntel (Nasdaq:SYNTNews) 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. Recently named one of the “50 Best Managed Global Outsourcing Vendors” by The Black Book of Outsourcing, Syntel is assessed at SEI CMMi Level 5, and is ISO 27001 and ISO 9001:2000 certified. As of June 30, 2010, Syntel employed more than 14,900 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, 2009 and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2010 2009 2010 2009
Net revenues $ 130,649 $ 100,102 $ 246,688 $ 196,536
Cost of revenues 79,083 51,846 145,883 103,408
Gross profit 51,566 48,256 100,805 93,128
Selling, general and administrative expenses 19,114 20,845 41,362 39,569
Income from operations 32,452 27,411 59,443 53,559
Other income, principally interest, net 1,959 2,325 4,242 3,310
Income before provision for income taxes 34,411 29,736 63,685 56,869
Income tax expense 6,151 4,624 10,294 4,408
Net income $ 28,260 $ 25,112 $ 53,391 $ 52,461
Dividend per share $ 0.06 $ 0.06 $ 0.12 $ 0.12
EARNINGS PER SHARE:
Basic $ 0.68 $ 0.61 $ 1.29 $ 1.27
Diluted $ 0.68 $ 0.61 $ 1.28 $ 1.27
Weighted average common shares outstanding:
Basic 41,508 41,379 41,495 41,367
Diluted 41,580 41,479 41,573 41,457
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
June 30, 2010 December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents $ 92,000 $ 87,822
Short term investments 129,479 112,243
Accounts receivable, net of allowance for doubtful accounts of $2,998 and $3,000 at June 30, 2010 and December 31, 2009, respectively 67,311 48,523
Revenue earned in excess of billings 13,762 5,809
Deferred income taxes and other current assets 29,730 23,739
Total current assets 332,282 278,136
Property and equipment 153,410 143,911
Less accumulated depreciation and amortization 59,942 54,271
Property and equipment, net 93,468 89,640
Goodwill 906 906
Non current Term Deposits with Banks 21,474 23,337
Deferred income taxes and other non current assets 23,405 20,603
$ 471,535 $ 412,622
LIABILITIES
Current liabilities:
Accrued payroll and related costs $ 28,929 $ 26,240
Income taxes payable 3,200 777
Accounts payable and other current liabilities 26,166 21,139
Deferred revenue 5,657 5,888
Total current liabilities 63,952 54,044
Other non current liabilities 9,749 8,540
Total liabilities 73,701 62,584
SHAREHOLDERS’ EQUITY
Total shareholders’ equity 397,834 350,038
Total liabilities and shareholders’ equity $ 471,535 $ 412,622
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