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Press release from GlobeNewswire (a Nasdaq OMX company)

Syntel Reports Fourth Quarter and Full Year 2010 Financial Results

Thursday, February 17, 2011

Syntel Reports Fourth Quarter and Full Year 2010 Financial Results05:30 EST Thursday, February 17, 2011Highlights: Q4 revenue of $144.9M, up 23% from year-ago quarter and 3% sequentially Q4 EPS of $0.71 per diluted share Full Year revenue increase of 27% to $532.1M Full Year EPS of $2.73 per diluted share 2010 year-ending cash & short term investments of $287.2M Global Headcount of 17,383 on December 31, 2010, up 38% versus prior year TROY, Mich., Feb. 17, 2011 (GLOBE NEWSWIRE) -- Syntel, Inc. (Nasdaq:SYNT), a global information technology services and Knowledge Process Outsourcing (KPO) firm, today announced financial results for the fourth quarter and full year, ended December 31, 2010.Fourth Quarter Financial Highlights Syntel's revenue for the fourth quarter increased 23 percent to $144.9 million, compared to $117.8 million in the prior-year period, and increased three percent sequentially from $140.5 million in the third quarter of 2010. During the fourth quarter, Applications Outsourcing accounted for 76 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 14 percent, e-Business contributing eight percent and TeamSourcing at two percent. The Company's gross margin was 38.4 percent in the fourth quarter, compared to 50.2 percent in the prior-year period and 39.6 percent in the third quarter of 2010. Selling, General and Administrative (SG&A) expenses were 17.4 percent in the fourth quarter, compared to 17.0 percent in the prior-year period and 17.7 percent in the previous quarter. Fourth quarter income from operations was 20.9 percent as compared to 33.2 percent in the prior-year period and 21.9 percent in the third quarter of 2010. The sequential reduction in operating margin was the result of appreciation in the Indian rupee, advanced hiring which lowered utilization levels, and costs associated with facility expansion programs. Net income for the fourth quarter was $29.8 million or $0.71 per diluted share, compared to $35.8 million or $0.86 per diluted share in the prior-year period and net income of $30.4 million or $0.73 per diluted share in the third quarter of 2010.Full Year 2010 Financial Highlights Revenue for 2010 increased 27 percent to $532.1 million, from $419.0 million in 2009. The Company's operating margins in 2010 contracted to 22.7 percent, compared to 29.9 percent in 2009. Net income for the year was $113.6 million, or $2.73 per diluted share compared to $118.5 million or $2.86 per diluted share in 2009. Year-over-year margins and earnings were pressured by the impact of wage increases, currency fluctuations, and costs associated with investments in hiring and infrastructure. During 2010, Syntel spent $22.5 million in CAPEX, largely in support of campus infrastructure, paid $30.7 million in dividends ($0.74 per share), and finished the year with cash and short-term investments of $287.2 million. The Company added 30 new clients during the year and ended 2010 with 17,383 employees globally.Operational Highlights "We are extremely encouraged by the overall performance of our business in 2010, and are optimistic that the demand environment for our services will remain healthy in 2011," said Syntel CEO and President Prashant Ranade. "Growth has been broad-based for Syntel across service offerings, verticals, and clients. This provides us with increased confidence that our strategic investments and go-to-market approach are on the right track." "In 2010, Syntel's revenue grew by 27%. During the same period, global headcount increased 38% and our physical infrastructure capacity expanded by 9,000 seats," said Ranade. "We will continue to invest in the long-term sustainable health of our business, with a focus on driving enhanced value for all key Syntel stakeholders."2011 Guidance Based on current visibility levels and an exchange rate assumption of 45.6 rupees to the dollar, the Company currently expects 2011 revenue of $600 to $630 million and EPS in the range of $2.65 to $2.90.Syntel to Host Conference Call Syntel will discuss its fourth quarter and full year 2010 results today on a conference call at 10:00 a.m. (EST). To listen to the call, please dial (877) 837-3915 in the U.S./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 February 24, 2011 by dialing (800) 642-1687 and entering "43767427". 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 December 31, 2010, Syntel employed more than 17,300 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 September 30, 2010.SYNTEL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(IN THOUSANDS, EXCEPT SHARE DATA)                       THREE MONTHS ENDED TWELVE MONTHS ENDED   DECEMBER 31, DECEMBER 31,   2010 2009 2010 2009           Net revenues  $ 144,900  $ 117,772  $ 532,133  $ 419,006 Cost of revenues 89,278 58,658 320,042 215,154 Gross profit 55,622 59,114 212,091 203,852 Selling, general and administrative expenses 25,270 19,968 91,556 78,463           Income from operations 30,352 39,146 120,535 125,389           Other income, principally interest 4,008 3,222 13,126 10,059           Income before income taxes  34,360  42,368  133,661  135,448           Income tax expense 4,597 6,587 20,068 16,953           Net income  $ 29,763  $ 35,781  $ 113,593  $ 118,495                     Dividend per share  $ 0.56  $ 0.06  $ 0.74  $ 0.24          EARNINGS PER SHARE:         Basic  $ 0.72  $ 0.86  $ 2.74  $ 2.86 Diluted  $ 0.71  $ 0.86  $ 2.73  $ 2.86          Weighted average common shares outstanding:                   Basic 41,570 41,463 41,524 41,407           Diluted 41,679 41,542 41,611 41,491  SYNTEL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(IN THOUSANDS)        December, 31December, 31   2010  2009             ASSETS           Current assets:     Cash and cash equivalents  $ 78,505  $ 87,822 Short term investments 208,695 112,243 Accounts receivable, net of allowance for doubtful accounts of $3,090 and $3000 at December 31, 2010 and December 31, 2009, respectively  75,873 48,523 Revenue earned in excess of billings 5,329 5,809 Deferred income taxes and other current assets 43,705 23,739       Total current assets  412,107  278,136       Property and equipment 171,445 143,911 Less accumulated depreciation and amortization 69,338 54,271       Property and equipment, net  102,107  89,640       Goodwill 906 906       Non current Term Deposits with Banks 66 23,337       Deferred income taxes and other non current assets 30,931 20,603       $ 546,117  $ 412,622      LIABILITIES           Current liabilities:     Accrued payroll and related costs  $ 40,736  $ 26,240 Income taxes payable 2,291 777 Accounts payable and other current liabilities 29,384 21,139 Deferred revenue 9,783 5,888       Total current liabilities  82,194  54,044       Other non current liabilities 12,453 8,540       Total liabilities  94,647  62,584      SHAREHOLDERS' EQUITY                 Total shareholders' equity  451,470  350,038       Total liabilities and shareholders' equity $ 546,117  $ 412,622 CONTACT: Jon Luebke, Syntel, (248) 619-3503, jon_luebke@syntelinc.com