Syntel Reports Third Quarter 2006 Financial Results
TROY, Mich.--Syntel, Inc. , a global information technology services and Business Process Outsourcing (BPO) firm, today announced financial results for the third quarter, ended September 30, 2006.
Third Quarter 2006 Financial Highlights
Syntel's total revenue for the third quarter increased 18.3 percent to $69.2 million, compared to $58.5 million in the prior-year period and 7.5 percent sequentially from $64.4 million in the second quarter of 2006. The Company's gross margin was 38.4 percent in the third quarter, compared to 39.7 percent in the prior-year period and 35.6 percent in the second quarter of 2006.
During the third quarter, Syntel's focus area of Applications Outsourcing accounted for 72 percent of total revenue, with e-Business contributing 14 percent, TeamSourcing at six percent, and Business Process Outsourcing (BPO) at eight percent.
The Company's Selling, General and Administrative (SG&A) expenses were 18.9 percent in the third quarter of 2006, compared to 18 percent in the prior-year period and 18.1 percent in the second quarter of 2006. Syntel's income from operations was 19.5 percent in the third quarter, compared to 21.7 percent in the prior-year quarter and 17.5 percent in the second quarter of 2006. During the quarter, Syntel reversed a tax reserve of $2.0 million, which had the positive effect of increasing EPS by $0.05 per share.
Syntel's global headcount grew 13 percent sequentially during the third quarter of 2006 to 7,506 as compared to 6,669 at the end of the second quarter of 2006. The Company finished the quarter with cash and short term investments of $75.8 million. This was after the payout of $51 million for the special one-time dividend of $1.25 per share.
Syntel added two new clients in the quarter and launched 82 new engagements. The Company added three new "Hunting Licenses" or preferred partnership agreements during the quarter, taking the total to 79 strategic relationships.
Operational Highlights
"Syntel’s focus on People, Service Offerings and World-Class Infrastructure is beginning to yield results, as evidenced by our increased momentum,” said Syntel Chairman and Chief Executive Officer Bharat Desai. "Our objective is to align even more closely with our strategic clients and deliver game-changing technology and business solutions that enable them to run their businesses more effectively. Our clients tell us Syntel’s model is more flexible, innovative, and impactful than our competitors; we will continue to leverage and build on this critical value proposition.”
“During the third quarter, Syntel was pleased to officially open our new 40 acre state-of-the-art technology campus in Pune, India,” said Keshav Murugesh, Syntel Chief Operating Officer. “The new campus is receiving rave reviews from both our clients and our employees who are based there. This is an important step forward, both from a client comfort and employee relations standpoint. This is the first of additional infrastructure inroads we will be pursuing this year, and beyond.”
Updated 2006 Guidance
Based on current visibility levels, the Company now expects 2006 revenue in the range of $266-$269 million and EPS between $1.18 to $1.20.
Syntel to Host Conference Call
Syntel will discuss its third 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 the call start time to register and download any necessary audio software. A replay will be available by dialing (800) 642-1687 and entering “8513930" from 1:00 p.m. on October 18, 2006 until midnight on October 25, 2006. International callers may dial (706) 645-9291 and enter the same pass code.
About Syntel
Syntel 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 more than 7,500 employees worldwide, is assessed at Level 5 of the SEI's CMMI, BS 7799-2:2002 as well as ISO 9001:2000 certified. To learn more, visit us at: www.syntelinc.com.
Safe Harbor Provision
This news release includes forward-looking statements, including 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 Form 10-K document dated March 14, 2006. Factors that could cause results to differ materially from those set forth above include general trends and developments in the information technology industry, which is subject to rapid technological changes, and the Company's concentration of sales in a relatively small number of large customers, as well as intense competition in the information technology industry, which the Company believes will increase.
| SYNTEL, INC. AND SUBSIDIARIES | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
| (IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||||||||||
| THREE MONTHS | NINE MONTHS | |||||||||||
|
ENDED SEPTEMBER 30 |
ENDED SEPTEMBER 30 | |||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||
| Net Revenues | $ | 69,217 | $ | 58,501 | $ | 197,123 | $ | 163,910 | ||||
| Cost of revenues | 42,635 | 35,298 | 123,267 | 97,756 | ||||||||
| GROSS PROFIT | 26,582 | 23,203 | 73,856 | 66,154 | ||||||||
| Selling, general and administrative expenses | 13,056 | 10,533 | 35,299 | 32,397 | ||||||||
| Income from operations | 13,526 | 12,670 | 38,557 | 33,757 | ||||||||
| Other income, principally interest | 1,298 | 810 | 3,525 | 2,654 | ||||||||
| Income before income taxes | 14,824 | 13,480 | 42,082 | 36,411 | ||||||||
| Provision for income taxes | 293 | 1,741 | 4,443 | 5,992 | ||||||||
| NET INCOME | $ | 14,531 | $ | 11,739 | $ | 37,639 | $ | 30,419 | ||||
| Dividend Per Share : | $ | 1.31 | $ | 0.06 | $ | 1.43 | $ | 1.68 | ||||
| EARNINGS PER SHARE : | ||||||||||||
| Basic | $ | 0.36 | $ | 0.29 | $ | 0.92 | $ | 0.75 | ||||
| Diluted | $ | 0.35 | $ | 0.29 | $ | 0.92 | $ | 0.75 | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING : | ||||||||||||
| Basic | 40,865 | 40,576 | 40,783 | 40,487 | ||||||||
| Diluted | 41,123 | 40,669 | 41,038 | 40,588 | ||||||||
| SYNTEL, INC. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (IN THOUSANDS) | ||||||
|
September 30, |
December 31, |
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|
2006 |
2005 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 37,212 | $ | 99,390 | ||
| Short term investments | 38,579 | 21,083 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $2,578 and $2,575 at September 30, 2006 and December 31, 2005, respectively | 40,491 | 27,907 | ||||
| Revenue earned in excess of billings | 9,052 | 8,366 | ||||
| Deferred income taxes and other current assets | 12,496 | 10,003 | ||||
| Total current assets | 137,830 | 166,749 | ||||
| Property and equipment | 62,869 | 54,690 | ||||
| Less accumulated depreciation and amortization | 29,223 | 25,504 | ||||
| Property and equipment, net | 33,646 | 29,186 | ||||
| Goodwill | 906 | 906 | ||||
| Deferred income taxes and other noncurrent assets | 2,291 | 1,320 | ||||
| $ | 174,673 | $ | 198,161 | |||
| LIABILITIES | ||||||
| Current liabilities: | ||||||
| Accrued payroll and related costs | $ | 17,033 | $ | 15,906 | ||
| Income taxes payable | 3,363 | 9,809 | ||||
| Accounts payable and other current liabilities | 15,250 | 16,812 | ||||
| Deferred revenue | 4,121 | 3,356 | ||||
| Total liabilities | 39,767 | 45,883 | ||||
| SHAREHOLDERS' EQUITY | ||||||
| Total shareholders' equity | 134,906 | 152,278 | ||||
| Total liabilities and shareholders' equity | $ | 174,673 | $ | 198,161 | ||