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Press release from GlobeNewswire (a Nasdaq OMX company)

Syntel Reports Third Quarter 2010 Financial Results

Thursday, October 28, 2010

Syntel Reports Third Quarter 2010 Financial Results05:30 EDT Thursday, October 28, 2010Highlights: Q3 revenue of $140.5M, up 34% from year-ago quarter and 8% percent sequentially Q3 EPS of $0.73 per diluted share, flat with year-ago quarter and up 8% sequentially Q3 cash & short-term investments of $262.0M Global Headcount of 16,288 as of September 30, 2010 TROY, Mich., Oct. 28, 2010 (GLOBE NEWSWIRE) -- Syntel, Inc. (Nasdaq:SYNT), a global information technology services and Knowledge Process Outsourcing (KPO) firm, today announced financial results for the third quarter, ended September 30, 2010.Third Quarter Financial Highlights Syntel's revenue for the third quarter increased 34 percent to $140.5 million, compared to $104.7 million in the prior-year period, and increased eight percent sequentially from $130.6 million in the second quarter of 2010. During the third quarter, Applications Outsourcing accounted for 76 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 15 percent, e-Business contributing seven percent and TeamSourcing at two percent. The Company's gross margin was 39.6 percent in the third quarter, compared to 49.3 percent in the prior-year period and 39.5 percent in the second quarter of 2010. Selling, General and Administrative (SG&A) expenses were 17.7 percent in the third quarter, compared to 18.1 percent in the prior-year period and 14.6 percent in the previous quarter. Third quarter income from operations was 21.9 percent as compared to 31.2 percent in the prior-year period and 24.8 percent in the second quarter of 2010. Operating margin in the third quarter was pressured by higher SG&A expenses, including costs associated with aggressive facility expansion programs. SG&A expenses also increased by $1.4M during the quarter and $3.1M sequentially due to exchange rate variations. Net income for the third quarter was $30.4 million or $0.73 per diluted share, compared to $30.3 million or $0.73 per diluted share in the prior-year period and net income of $28.3 million or $0.68 per diluted share in the second quarter of 2010.Operational Highlights"Overall, business momentum remained strong in the third quarter, as evidenced by our top line performance," said Syntel CEO and President Prashant Ranade. "Revenue growth was broad-based across all key service offerings, and particularly strong in the Financial Services vertical. Syntel also continued to improve its positioning with strategic clients by helping drive both operational efficiency and business innovation." "In support of our growth plans and longer-term market opportunities, Syntel continues to invest in our business," said Ranade. "During the third quarter, Syntel added an additional 1,362 employees, and our headcount has now grown 30 percent globally since the beginning of 2010. Our new campus in Chennai is now operational, and we have initiated infrastructure expansion programs in both Pune and Mumbai."2010 Guidance Based on current visibility levels and an exchange rate assumption of 44.4 rupees to the dollar, the Company currently expects 2010 revenue of $532 to $535 million and EPS in the range of $2.65 to $2.69.Syntel to Host Conference Call Syntel will discuss its third quarter 2010 results today on a conference call at 10:00 a.m. (Eastern). 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 will be available until November 4, 2010 by dialing (800) 642-1687 and entering "18671551". International callers may dial (706) 645-9291 and enter the same passcode.About Syntel Syntel (Nasdaq:SYNT) 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. Syntel is assessed at SEI CMMi Level 5, and is ISO 27001 and ISO 9001:2000 certified. As of September 30, 2010, Syntel employed more than 16,200 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 June 30, 2010. SYNTEL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(IN THOUSANDS, EXCEPT SHARE DATA)                       THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,   2010 2009 2010 2009           Net revenues  $ 140,545  $ 104,698  $ 387,233  $ 301,234 Cost of revenues 84,881 53,088 230,764 156,496 Gross profit 55,664 51,610 156,469 144,738 Selling, general and administrative expenses 24,924 18,926 66,286 58,495           Income from operations 30,740 32,684 90,183 86,243           Other income, principally interest 4,876 3,527 9,118 6,837           Income before income taxes  35,616  36,211  99,301  93,080           Income tax expense 5,177 5,958 15,471 10,366           Net income  $ 30,439  $ 30,253  $ 83,830  $ 82,714                     Dividend per share  $ 0.06  $ 0.06  $ 0.18  $ 0.18          EARNINGS PER SHARE:         Basic  $ 0.73  $ 0.73  $ 2.02  $ 2.00 Diluted  $ 0.73  $ 0.73  $ 2.02  $ 1.99          Weighted average common shares outstanding:                   Basic 41,537 41,431 41,509 41,388           Diluted 41,618 41,507 41,588 41,473 SYNTEL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(IN THOUSANDS)         September, 30 2010  December, 31 2009             ASSETS           Current assets:     Cash and cash equivalents  $ 86,995  $ 87,822 Short term investments 175,041 112,243 Accounts receivable, net of allowance for doubtful accounts of $3,072 and $3000 at September 30, 2010 and December 31, 2009, respectively  79,533 48,523 Revenue earned in excess of billings 11,829 5,809 Deferred income taxes and other current assets 42,561 23,739        Total current assets  395,959  278,136       Property and equipment 163,498 143,911 Less accumulated depreciation and amortization 66,015 54,271       Property and equipment, net  97,483  89,640       Goodwill 906 906       Non current Term Deposits with Banks 4,566 23,337             Deferred income taxes and other non current assets 28,586 20,603       $ 527,500  $ 412,622      LIABILITIES           Current liabilities:     Accrued payroll and related costs  $ 35,101  $ 26,240 Income taxes payable 1,963 777 Accounts payable and other current liabilities 29,055 21,139 Deferred revenue 7,677 5,888       Total current liabilities  73,796  54,044       Other non current liabilities 11,427 8,540       Total liabilities  85,223  62,584      SHAREHOLDERS' EQUITY                 Total shareholders' equity  442,277  350,038       Total liabilities and shareholders' equity $ 527,500  $ 412,622 CONTACT: Syntel, Inc. Jon Luebke (248) 619-3503 jon_luebke@syntelinc.com