Syntel reports $8.7 M net income

By SiliconIndia   |   Thursday, 24 October 2002, 07:00 Hrs
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TROY: Syntel Inc. (Nasdaq: SYNT) Thursday reported net income of $8.7 million or $0.22 per diluted share compared to $6.3 million or $0.16 per diluted share in the second quarter of 2002 and $6.3 million or $0.16 per diluted share in the third quarter of 2001.

Revenue from Applications Outsourcing and e-Business, Syntel's two strategic focus areas increased approximately 9 percent sequentially to $38.4 million compared to $35.3 million last quarter and $37.7 million in the prior year. These two areas accounted for 91 percent of the total revenue in the third quarter compared to 89 percent in the second quarter and 87 percent for the prior-year quarter. Total revenue for the 2002 third quarter was $42.1 million as compared to $39.5 million in the second quarter of 2002 and $43.3 million in the year-ago quarter. During the second quarter of 2002, the Company as per its best estimate of the likely outcome of a contract renegotiation, created a reserve of $0.57 million. Based on a positive outcome, the reserve became unnecessary and the reversal had the one-time impact of $0.01 on earnings per share in the third quarter.

The Company's gross margin widened 640-basis-points to 44.6 percent in the 2002 third quarter from 38.2 percent for the year-ago period and 39.5 percent from the previous quarter. The operating margin was 25.7 percent as compared to 18.3 percent during the year-ago period. These gains reflect Syntel's higher resource utilization rates, growing mix of higher margin, value-added offshore solutions and enhanced focus on cost efficiencies.

During the quarter, the company amended its policy on encashment of unused vacation/personal time of employees. This is likely to result in the release of accruals during the fourth quarter of 2002.

"Syntel's third quarter revenues and financial metrics were better than analysts estimates," said Bharat Desai, Syntel Chairman and CEO. "Our gross margin and utilization rates continued to strengthen, reflecting the continued shift of projects to our offshore Global Development Centers. More than 85 percent of the company's revenues came from customers who have been doing business with Syntel for more than a year, a testament to the quality of our work and the strength of our client relationships. We also began work on 60 new projects in the quarter, as we begin to see growing momentum from our broadened sales effort."

Syntel's financial position remains very strong. The Company ended the quarter with a cash position of $125 million on Sept 30, 2002 compared to $115 million on June 30, 2002. Additionally, the Company has no debt and significant unused borrowing capacity. As a result of the Company's strong focus on collections, Day Sales Outstanding (DSOs) dropped further to 54 days from 59 days in the previous quarter and 61 days in the prior year period.

"We are pleased with the continued progress Syntel is making in serving our Global 2000 roster of clients and attracting new ones to our unique brand of technology solution delivery," stated Keshav Murugesh, Syntel Chief Financial Officer. "As the challenging economy pushes more U.S. organizations to pursue a global delivery approach for cost, speed and quality advantages, we believe Syntel is very well positioned for success. Looking forward, we are confident that we have laid a solid foundation for our future. We continue to expect the maturity of our recent client wins and the increased productivity of our recently upgraded sales force to build momentum over time. We also continue to invest in our infrastructure, to support the growth that we expect, as we look to hire additional consultants by year-end. Based on our performance till date and our enhanced visibility to the fourth quarter, we are revising up our guidance for 2002 revenues to the range of $162-$164 million and our EPS outlook to the range of $0.72-$0.74."

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