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Press release from GlobeNewswire (a Nasdaq OMX company)

Syntel Reports Third Quarter 2011 Financial Results

Thursday, October 20, 2011

Syntel Reports Third Quarter 2011 Financial Results04:00 EDT Thursday, October 20, 2011Highlights: Q3 revenue of $167.6M, up 19% from year-ago quarter and 7% sequentially Q3 EPS of $0.63 per diluted share, including a previously disclosed one-time cost, which reduced EPS by $0.17 per diluted share Q3 cash & short term investments of $301.3M Global Headcount of 18,293 on September 30, 2011, up 12% versus prior year TROY, Mich., Oct. 20, 2011 (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, 2011.Third Quarter Financial Highlights Syntel's revenue for the third quarter increased 19 percent to $167.6 million, compared to $140.5 million in the prior-year period, and increased seven percent sequentially from $157.0 million in the second quarter of 2011. During the third quarter, Applications Outsourcing accounted for 75 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 15 percent, e-Business contributing eight percent and TeamSourcing at two percent. The Company's gross margin was 39.8 percent in the third quarter, compared to 39.6 percent in the prior-year period and 36.2 percent in the second quarter of 2011. Selling, General and Administrative (SG&A) expenses were 21.9 percent of revenue in the third quarter, compared to 17.7 percent in the prior-year period as well as in the previous quarter. As previously disclosed, Syntel incurred a one-time expense to resolve all claims brought as part of an arbitration proceeding with a former client arising out of a 2004 engagement. The inclusion of this expense drove SG&A higher during the quarter; excluding this expense, SG&A declined as a percent of revenue versus both the year-ago quarter and the second quarter of 2011.   The third quarter income from operations was 17.9 percent of revenue as compared to 21.9 percent in the prior-year period and 18.5 percent in the second quarter. Excluding the aforementioned one-time expense, operating margins widened from both the prior-year period and the second quarter of 2011. After reversals of tax provisions and tax reserves of $1.8 million, no longer required, net income for the third quarter was $26.2 million or $0.63 per diluted share, including the $0.17 impact from the arbitration settlement, compared to $30.4 million or $0.73 per diluted share in the prior-year period and net income of $27.6 million or $0.66 per diluted share in the second quarter of 2011 During Q3, Syntel spent $6.2 million in CAPEX, largely in support of campus infrastructure, and finished the quarter with cash and short-term investments of $301.3 million. The Company also added 266 net employees, ending the quarter with 18,293 employees globally.Operational Highlights "Syntel continued to execute well on its operational and financial goals," said Syntel CEO and President Prashant Ranade. "Year-over-year revenue growth of 19% in the third quarter was strong. Our pipelines are healthy and client spending patterns remain unchanged, despite the macroeconomic uncertainties." "Syntel remains focused on the long-term," said Ranade. "Our hiring and infrastructure build-out plans are on track and we expect these investments to drive considerable and sustainable value over time." "During the quarter, we strengthened our relationships with strategic clients and focused on new initiatives to drive future growth from clients 6 through 20. Syntel is well-positioned to help our clients meet their internal operational goals in this uncertain climate. As a result, when companies seek to reduce expenses we are trusted partners and part of the solution."  2011 Guidance Based on current visibility levels and an exchange rate assumption of 49.0 Indian Rupees to the US dollar, the Company currently expects 2011 revenue of $635 to $640 million and EPS in the range of $2.65 to $2.73.Syntel to Host Conference Call Syntel will discuss its third quarter 2011 results today on a conference call at 10:00 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 will be available until October 27, 2011 by dialing (855) 859-2056 and entering "18646539". International callers may dial (404) 537-3406 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 ISO 27001 and ISO 9001:2000 certified. As of September 30, 2011, Syntel employed more than 18,000 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, 2010, the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, or from other factors not currently anticipated.SYNTEL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(IN THOUSANDS, EXCEPT SHARE DATA)            THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,   2011 2010 2011 2010           Net revenues  $ 167,627  $ 140,545  $ 469,984  $ 387,233 Cost of revenues 100,893 84,881 295,653 230,764 Gross profit 66,734 55,664 174,331 156,469 Selling, general and administrative expenses 36,679 24,924 89,083 66,286           Income from operations 30,055 30,740 85,248 90,183           Other income, principally interest 1,632 4,876 13,674 9,118           Income before provision for income taxes  31,687  35,616  98,922  99,301           Income tax expense 5,480 5,177 20,026 15,471           Net income  $ 26,207  $ 30,439  $ 78,896  $ 83,830                     Dividend per share  $ 0.06  $ 0.06  $ 0.18  $ 0.18          EARNINGS PER SHARE:         Basic $ 0.63  $ 0.73  $ 1.90  $ 2.02 Diluted  $ 0.63  $ 0.73  $ 1.89  $ 2.02          Weighted average common shares outstanding:                   Basic 41,640 41,537 41,608 41,509           Diluted 41,724 41,618 41,710 41,588  SYNTEL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(IN THOUSANDS)  September 30,  2011 December 31,  2010             ASSETS           Current assets:     Cash and cash equivalents  $ 89,172  $ 78,505 Short term investments 212,083 208,695 Accounts receivable, net of allowance for doubtful accounts of $2,547 and $3,090 at September 30, 2011 and December 31, 2010, respectively  83,369 75,873 Revenue earned in excess of billings 15,664 5,329 Deferred income taxes and other current assets 56,615 43,705        Total current assets  456,903  412,107       Property and equipment 192,613 171,445 Less accumulated depreciation and amortization 75,282 69,338        Property and equipment, net  117,331  102,107       Goodwill 906 906       Non current Term Deposits with Banks 28 66       Deferred income taxes and other non current assets 29,163 30,931       $ 604,331  $ 546,117 LIABILITIES           Current liabilities:     Accrued payroll and related costs  $ 40,377  $ 40,736 Income taxes payable 6,226 2,291 Accounts payable and other current liabilities 49,378 29,384 Deferred revenue 7,323 9,783        Total current liabilities  103,304  82,194       Other non current liabilities 14,021 12,453        Total liabilities  117,325  94,647      SHAREHOLDERS' EQUITY           Total shareholders' equity  487,006  451,470       Total liabilities and shareholders' equity $ 604,331  $ 546,117 CONTACT: North America/Europe: Jon Luebke Syntel 248/619-3503 jon_luebke@syntelinc.com AsiaPac: Suruchi Sharma Syntel +91 9833691415 suruchi_sharma@syntelinc.com