Syntel Reports Results for Second Quarter 2004
TROY, Mich.--July 22, 2004--Syntel, Inc.:Second Quarter Highlights:
-- Revenue of $45.8M
-- Gross margin of 42.8%
-- EPS of $0.23 per diluted share
-- Cash and Marketable Securities of $149.4M
Syntel, Inc., a global information technology services firm, today announced financial results for the second quarter ended June 30, 2004.
Syntel's total revenue for the second quarter was $45.8 million, compared to $43.9 million in the prior-year period and $45.1 million in the first quarter of 2004. The gross margin was 42.8 percent in the second quarter of 2004, compared to 45.0 percent in the prior-year period. Utilization levels were 76 percent in the second quarter, as compared to 83 percent in the prior-year quarter as hiring and training of resources continued. The gross margin was 42.1 percent in the first quarter of 2004.
During the second quarter, Syntel's core focus area of Applications Outsourcing accounted for 74.9 percent of total revenue, with e-Business contributing 17.5 percent, Team Sourcing at 6.7 percent and Business Process Outsourcing (BPO) just below one percent.
The Company's Selling General and Administrative (SGA) expenses were 19.2 percent in the second quarter of 2004, compared to 14.8 percent in the prior-year period and 19.6 percent in the first quarter of 2004. As previously reported during the second quarter of 2003, the Company had reversed $0.8 million of accruals related to overdue debts and released reserves of $0.5 million relating to legal costs.
Syntel's income from operations was 23.5 percent in the second quarter, compared to 30.2 percent in the prior-year period and 22.5 percent in the first quarter of 2004.
Syntel's income tax rate was 15.6 percent in the second quarter of 2004, compared to 27.1 percent in the prior-year period and 16.5 percent in the first quarter of 2004. As discussed in the previous quarter, the tax rate continues to be positively impacted by the combined effects of offshore transition and reduced onsite profitability. In addition, during the second quarter of 2004, the provision for income tax was reduced by an R&D tax credit which had a positive impact of $0.5 million on taxes and a $0.01 impact on EPS.
Net income for the second quarter was $9.4 million or $0.23 per diluted share, compared to $10.3 million or $0.25 per diluted share in the prior-year period, and $9.3 million or $0.23 per diluted share in the first quarter of 2004.
During the second quarter of 2004, Syntel added six new corporate clients to its roster and launched 81 new engagements. At the end of the second quarter, Syntel's "hunting licenses" or preferred partnership agreements with Global 2000 corporations totaled 59.
Global headcount grew to 4,054 in the second quarter of 2004, compared to 3,956 in the first quarter of 2004. Billable headcount in Q2 was 2,748. Utilization during the second quarter was 98 percent domestically and 63 percent offshore.
Syntel's financial position and cash generation remain very strong. The Company ended the second quarter with $149.4 million in cash and marketable securities. The Company remains debt-free.
Revised Outlook
While Syntel is making progress in adding new corporate clients, enhancing our infrastructure and investing in sales & marketing activities, the timing of the revenue ramp continues to present a challenge. As a result, the Company is revising full-year guidance for 2004. The Company currently expects revenue in the range of $180M to $185M and EPS between $0.84 and $0.88 for the full-year 2004.
Syntel to Host Conference Call
Syntel will discuss its second quarter performance today on a conference call at 10:00 a.m. (Eastern). To listen to the call, please dial (888) 689-9220. The call will also be broadcast live via the Internet at Syntel's web site: www.syntelinc.com under the "Investor Relations" section. Please go to the web site at least 15 minutes prior to call start time to register and download any necessary audio software. A replay will be made available by calling (800) 642-1687 and entering "8461251" beginning at 1 p.m. (Eastern) on July 22, 2004 through midnight (Eastern) on July 28, 2004.
About Syntel
Syntel (SYNT) is a leading global provider of custom outsourcing solutions in a broad spectrum of information technology and information technology-enabled services. The Company's vertical practices support the entire Design-Build-Operate-Optimize lifecycle of systems and processes for corporations in the Financial Services, Insurance, Retail, Health Care and Automotive industries. The first US-based firm to launch a Global Delivery Service to drive speed-to-market and quality advantages for its customers, Syntel now leverages this efficient model for the majority of its Global 2000 customers. Recently named one of Forbes Magazine's "Best 200 Small Companies in America," Syntel has over 4,000 employees worldwide, is assessed at Level 5 of the SEI's CMM and is ISO 9001:2000 certified. To learn more, visit us at: www.syntelinc.com.
Balance sheet and income statement to follow.
SYNTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
3 MONTHS 6 MONTHS
ENDED JUNE 30 ENDED JUNE 30
--------------------- --------------------
2004 2003 2004 2003
----------- --------- ----------- --------
Net Revenue $45,846 $43,915 $90,935 $87,993
Cost of revenues 26,234 24,156 52,319 49,236
----------- --------- ----------- --------
Gross profit 19,612 19,759 38,616 38,757
Selling, general and
administrative expenses 8,822 6,509 17,661 14,398
----------- --------- ----------- --------
Income from operations 10,790 13,250 20,955 24,359
Other income, principally
interest 357 845 1,353 1,460
----------- --------- ----------- --------
Income before income taxes 11,147 14,095 22,308 25,819
Provision for income tax 1,742 3,821 3,581 7,168
----------- --------- ----------- --------
Net income before loss from
equity investment 9,405 10,274 18,727 18,651
Loss from equity investment 0 22 0 47
----------- --------- ----------- --------
Net income $9,405 $10,252 $18,727 $18,604
=========== ========= =========== ========
Dividend per share $- $- $-
EARNINGS PER SHARE
Basic $0.23 $0.26 $0.47 $0.47
Diluted $0.23 $0.25 $0.46 $0.46
Weighted average common shares
outstanding :
Basic 40,259 39,470 40,190 39,358
=========== ========= =========== ========
Diluted 40,510 40,638 40,562 40,566
=========== ========= =========== ========
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
June, 30 Dec. 31,
2004 2003
-------------------------
ASSETS
Current assets:
Cash and cash equivalents $100,183 $110,699
Short Term Investments, principally
marketable securities 49,187 26,137
Accounts receivable, net of allowances of
$827 and $809 at June 30, 2004 and
December 31, 2003, respectively 28,394 25,828
Revenue earned in excess of billings 6,597 6,601
Deferred income taxes and other current
assets 5,560 5,617
-------------------------
Total current assets 189,921 174,882
Property and equipment 27,921 25,617
Less Accumulated depreciation 19,618 18,502
-------------------------
Property and equipment, net 8,303 7,115
Goodwill 906 906
Deferred income taxes and other noncurrent
assets 3,463 3,178
-------------------------
$202,593 $186,081
=========================
LIABILITIES
Current liabilities:
Accrued payroll and related costs $12,270 $11,851
Income taxes payable 7,887 6,507
Accounts payable and other current
liabilities 9,752 9,861
Deferred revenue 3,203 4,456
-------------------------
Total liabilities 33,112 32,675
SHAREHOLDERS' EQUITY
Total Shareholders' equity 169,481 153,406
-------------------------
Total liabilities and shareholders' equity $202,593 $186,081
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