Highlights:
Syntel, Inc. (Nasdaq:SYNT), a leading global provider of integrated
information technology and knowledge process services, today
announced financial results for the second quarter, ended June 30,
2018.
Second Quarter Financial
HighlightsSyntel's revenue for the second quarter
increased 10.1 percent to $249.7 million from $226.8 million in the
prior-year period, and 1.8 percent from $245.3 million in the first
quarter of 2018. During the second quarter, Banking and
Financial Services accounted for 43.3 percent of total revenue,
with Retail, Logistics and Telecom at 18.6 percent, Healthcare and
Life Sciences at 18.1 percent, Insurance at 15.2 percent, and
Manufacturing at 4.8 percent.
The Company's gross margin was 33.9 percent in
the second quarter, compared to 36 percent in the prior-year period
and 37.2 percent in the first quarter of 2018. Selling, General and
Administrative (SG&A) expenses were 11.1 percent of revenue in
the second quarter, compared to 12.6 percent in the prior-year
period and 11 percent in the previous quarter.
The second quarter income from operations was
22.8 percent of revenue as compared to 23.4 percent in the
prior-year period and 26.2 percent in the first quarter of 2018.
Net income for the second quarter was $41.1 million or $0.49 per
diluted share, compared to $36.7 million or $0.44 per diluted share
in the prior-year period and $45.6 million or $0.55 per diluted
share in the first quarter of 2018.
During Q2, Syntel spent $1.6 million in CAPEX
and finished the quarter with cash and short-term investments of
$127.8 million. Syntel ended the quarter with 23,476 employees
globally.
Operational Highlights"I am
pleased with our Q2 results," said Syntel CEO and President Rakesh
Khanna. "Strong execution and our focus on building deep customer
relationships drove growth across every industry segment."
"We saw robust demand for Syntel's
next-generation digital solutions and automation-led services
during Q2," said Khanna. "Our long-standing collaboration with
customers guides the investments we make in critical services and
capabilities. Across our organization, there is a commitment to
helping our clients transform, compete and thrive in the digital
economy.”
Syntel Enters Definitive Agreement to be
Acquired by Atos S.E.On July 20, the Company entered into
a definitive merger agreement with Atos S.E. under which Atos will
acquire Syntel for $41 per share in cash. The merger agreement has
been approved unanimously by the boards of directors of both
companies; however, it is subject to regulatory approvals, approval
by Syntel shareholders and other customary closing conditions. The
transaction is expected to close by year-end 2018.
2018 Guidance In light of the
announced definitive merger agreement with Atos S.E., the Company
will not be providing further updates to its financial
guidance.
Syntel to Host Conference
CallSyntel will discuss its second quarter 2018 results
today on a conference call at 8:00 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 of this call will be
available starting on Friday, July 27 until August 3, 2018 by
dialing (855) 859-2056 and entering “4163139." International
callers may dial (404) 537-3406 and enter the same passcode.
About SyntelSyntel
(Nasdaq:SYNT) is a leading global provider of integrated
information technology and knowledge process services. Syntel helps
global enterprises evolve the core by leveraging automation, scaled
agile and cloud platforms to build efficient application
development and management, testing and infrastructure solutions.
Syntel’s digital services enable companies to engage customers,
discover new insights through analytics, and create a more
connected enterprise through the internet of things. Syntel’s
"Customer for Life" philosophy builds collaborative partnerships
and creates long-term client value by investing in IP, solutions
and industry-focused delivery teams with deep domain knowledge.
To learn more, visit us at
www.syntelinc.com.
Cautionary Statements Regarding
Forward-Looking StatementsThis communication includes
certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
are based on management’s current expectations or beliefs and on
currently available competitive, financial and economic data and
are subject to uncertainty and changes in circumstances. Actual
results may vary materially from those expressed or implied by the
forward-looking statements herein due to changes in economic,
business, competitive, technological and/or regulatory factors, and
other risks and uncertainties affecting the operation of the
business of Syntel, including many factors beyond our control.
These risks and uncertainties include, but are not limited to,
those associated with: the parties’ ability to meet expectations
regarding the timing and completion of the merger; the occurrence
of any event, change or other circumstance that would give rise to
the termination of the merger agreement; the failure to satisfy
each of the conditions to the consummation of the merger; the
disruption of management’s attention from ongoing business
operations due to the merger; the effect of the announcement of the
merger on Syntel’s relationships with its customers as well as its
operating results and business generally; the outcome of any legal
proceedings related to the merger; employee retention as a result
of the merger; our ability to maintain a competitive leadership
position with respect to the services that we offer; the conduct of
our business and operations internationally, including the
complexity of compliance with international laws and regulations
and risks related to adverse regulatory actions; our ability to
deliver new services to the market on time and in a manner
sufficient to meet demand; our ability to protect our computer
systems and networks from fraud, cyber-attacks or security
breaches; our assumptions, judgments and estimates regarding the
impact on our business of political instability in markets where we
conduct business; uncertainty in the global economic environment
and financial markets; the status of our relationships with and
condition of third parties, such as our key customers, upon whom we
rely in the conduct of our business; our ability to effectively
hedge our exposure to interest rate and foreign currency exchange
rate fluctuations; and our dependence on our key employees. For a
further list and description of the risks and uncertainties
affecting the operations of our business, see our filings with the
Securities and Exchange Commission, including our annual report on
Form 10-K and our quarterly reports on Form 10-Q.
The forward-looking statements speak only as of
the date such statements are made. Syntel is under no obligation
to, and expressly disclaims any obligation to, update or alter its
forward-looking statements, whether as a result of new information,
future events, changes in assumptions or otherwise.
Additional Information and Where to Find
ItThis communication may be deemed to be solicitation
material in respect of the proposed acquisition of Syntel by Atos.
In connection with the proposed acquisition, Syntel intends to file
relevant materials with the SEC, including Syntel’s proxy statement
on Schedule 14A. STOCKHOLDERS OF SYNTEL ARE URGED TO READ ALL
RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING SYNTEL’S PROXY
STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION. Investors and security holders will be
able to obtain the documents free of charge at the SEC’s web site,
http://www.sec.gov, and Syntel stockholders will receive
information at an appropriate time on how to obtain
transaction-related documents free of charge from Syntel. Such
documents are not currently available.
Participants in Solicitation
Syntel and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the holders of
Syntel common stock in respect of the proposed transaction.
Information about the directors and executive officers of Syntel is
set forth in the proxy statement for Syntel’s 2018 Annual Meeting
of Stockholders, which was filed with the SEC on April 27, 2018 and
Syntel’s Annual Report on Form 10-K for the year ended December 31,
2017, which was filed on February 26, 2018. Investors may obtain
additional information regarding the interest of such participants
by reading the proxy statement regarding the acquisition when it
becomes available.
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SYNTEL, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME |
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(UNAUDITED) |
|
(IN THOUSANDS, EXCEPT PER SHARE
DATA) |
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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JUNE 30, |
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JUNE 30, |
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2018 |
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|
2017 |
|
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2018 |
|
|
2017 |
|
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|
|
|
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Net
revenues |
$ |
249,699 |
|
$ |
226,811 |
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|
$ |
495,044 |
|
$ |
452,680 |
|
|
Cost of
revenues |
|
165,058 |
|
|
145,053 |
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|
|
319,149 |
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|
288,213 |
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Gross profit |
|
84,641 |
|
|
81,758 |
|
|
|
175,895 |
|
|
164,467 |
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|
Selling,
general and administrative expenses |
|
27,646 |
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|
28,659 |
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|
|
54,632 |
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|
58,913 |
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Income from operations |
|
56,995 |
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|
53,099 |
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|
|
121,263 |
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|
105,554 |
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Other income (expense): |
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Interest
Expense |
|
(2,193 |
) |
|
(3,216 |
) |
|
|
(4,626 |
) |
|
(6,592 |
) |
|
Non-Service
component of post retirement benefit cost |
|
(288 |
) |
|
(338 |
) |
|
|
(590 |
) |
|
(662 |
) |
|
Other
income |
|
1,470 |
|
|
462 |
|
|
|
2,031 |
|
|
958 |
|
|
Other
income (expense), net |
|
(1,011 |
) |
|
(3,092 |
) |
|
|
(3,185 |
) |
|
(6,296 |
) |
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|
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|
|
|
|
|
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Income
before provision for income taxes |
|
55,984 |
|
|
50,007 |
|
|
|
118,078 |
|
|
99,258 |
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|
|
|
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|
Income tax
expense |
|
14,836 |
|
|
13,355 |
|
|
|
31,291 |
|
|
24,226 |
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|
|
|
|
|
|
|
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|
Net
income |
$ |
41,148 |
|
$ |
36,652 |
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|
$ |
86,787 |
|
$ |
75,032 |
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Other Comprehensive
Income |
|
|
|
|
|
|
|
|
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|
Foreign currency translation adjustments |
$ |
(12,614 |
) |
$ |
937 |
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|
$ |
(15,071 |
) |
$ |
7,112 |
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Gains/(Losses) on derivatives: |
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Gains (losses) arising during period on cash flow hedges |
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975 |
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(672 |
) |
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|
3,885 |
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|
291 |
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Unrealized gains/(losses) on securities: |
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Unrealized holding gains arising during period |
|
426 |
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|
198 |
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|
699 |
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|
241 |
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|
Reclassification adjustment for gains included in net
income |
|
(207 |
) |
|
(89 |
) |
|
|
(156 |
) |
|
(81 |
) |
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|
219 |
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|
109 |
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|
|
543 |
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|
160 |
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Defined benefit pension plans: |
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Prior service cost arising during period |
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(457 |
) |
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Net profit arising during period |
|
- |
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|
- |
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|
18 |
|
|
6 |
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Amortization of prior service cost included in net periodic
pension cost |
|
(1 |
) |
|
24 |
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7 |
|
|
32 |
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(1 |
) |
|
24 |
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(432 |
) |
|
38 |
|
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Other comprehensive Income (Loss), before tax |
|
(11,421 |
) |
|
398 |
|
|
|
(11,075 |
) |
|
7,601 |
|
|
Income tax benefit (expenses) related to Other comprehensive
income (loss) |
|
(329 |
) |
|
224 |
|
|
|
(1,028 |
) |
|
(179 |
) |
|
Other comprehensive Income/(loss), net of
tax |
|
(11,750 |
) |
|
622 |
|
|
|
(12,103 |
) |
|
7,422 |
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Comprehensive
Income |
|
$ |
29,398 |
|
$ |
37,274 |
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|
$ |
74,684 |
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$ |
82,454 |
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EARNINGS PER SHARE: |
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Basic |
$ |
0.49 |
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$ |
0.44 |
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|
$ |
1.04 |
|
$ |
0.90 |
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Diluted |
$ |
0.49 |
|
$ |
0.44 |
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|
$ |
1.04 |
|
$ |
0.89 |
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Weighted average common shares outstanding: |
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Basic |
|
83,130 |
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|
83,818 |
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|
83,130 |
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|
83,807 |
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Diluted |
|
83,475 |
|
|
83,853 |
|
|
|
83,426 |
|
|
83,844 |
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SYNTEL, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(IN THOUSANDS) |
|
|
|
(Unaudited) |
|
(Audited) |
|
|
|
June 30, |
|
December 31, |
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|
|
2018 |
|
2017 |
|
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|
ASSETS |
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Current
assets: |
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Cash and cash equivalents |
$ |
77,971 |
|
$ |
95,994 |
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Short term investments |
|
49,797 |
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|
26,501 |
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|
Accounts receivable, net of allowance for doubtful accounts of
$49 at June 30, 2018 and $ Nil at December 31, 2017. |
|
118,007 |
|
|
115,052 |
|
|
Revenue earned in excess of billings |
|
35,955 |
|
|
24,995 |
|
|
Other current assets |
|
21,353 |
|
|
29,484 |
|
|
|
|
|
|
|
|
Total current assets |
|
303,083 |
|
|
292,026 |
|
|
|
|
|
|
|
|
Property
and equipment |
|
227,226 |
|
|
240,948 |
|
|
Less accumulated depreciation and amortization |
|
130,253 |
|
|
134,650 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
96,973 |
|
|
106,298 |
|
|
|
|
|
|
|
|
Goodwill |
|
906 |
|
|
906 |
|
|
|
|
|
|
|
|
Non current
Term Deposits with Banks |
|
380 |
|
|
396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes and other non current assets |
|
86,252 |
|
|
84,090 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
487,594 |
|
$ |
483,716 |
|
|
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|
LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT) |
|
|
|
|
LIABILITIES |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accrued payroll and related costs |
$ |
48,683 |
|
$ |
51,497 |
|
|
Income taxes payable |
|
34,638 |
|
|
21,100 |
|
|
Accounts payable and other current liabilities |
|
39,762 |
|
|
34,762 |
|
|
Deferred revenue |
|
3,542 |
|
|
3,240 |
|
|
Loans and borrowings |
|
27,974 |
|
|
24,268 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
154,599 |
|
|
134,867 |
|
|
|
|
|
|
|
|
Deferred income taxes
and other non current liabilities |
|
|
28,642 |
|
|
27,325 |
|
|
Non Current
loans and borrowings |
|
239,548 |
|
|
334,446 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
422,789 |
|
|
496,638 |
|
|
|
|
|
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|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total
shareholders' equity/(deficit) |
|
64,805 |
|
|
(12,922 |
) |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT) |
$ |
487,594 |
|
$ |
483,716 |
|
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Contact:
Zaineb Bokhari, Syntel, zaineb_bokhari@syntelinc.com
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