EX-99.1 2 k99634exv99w1.txt PRESS RELEASE DATED OCTOBER 27, 2005 Exhibit 99.1 SYNTEL REPORTS THIRD QUARTER FINANCIAL RESULTS Q3 HIGHLIGHTS : -- Year-over-year revenue increase 26% to $58.5M -- EPS of $0.29 per diluted share -- Headcount crossed the 5,500 mark TROY, Mich., October 27, 2005 -- Syntel, Inc. (SYNT), a global information technology services firm, today announced financial results for the third quarter, ended September 30, 2005. Syntel's total revenue for the third quarter increased 25.5 percent to $58.5 million, compared to $46.6 million in the prior-year period and 7.0 percent sequentially from $54.7 million in the second quarter of 2005. The Company's gross margin was 39.7 percent in the third quarter of 2005, compared to 42.0 percent in the prior-year period and 40.1 percent in the second quarter of 2005. Gross margins during the current quarter were impacted by an increase in hiring and investments in our services. During the third quarter, Syntel's focus area of Applications Outsourcing accounted for 75.0 percent of total revenue, with e-Business contributing 13.6 percent, TeamSourcing at 8.1 percent, and Business Process Outsourcing (BPO) at 3.3 percent. The Company's Selling, General and Administrative (SG&A) expenses were 18.0 percent in the third quarter of 2005, compared to 19.0 percent in the prior-year period and 19.6 percent in the second quarter of 2005. Syntel's income tax rate was a 12.9 percent in the third quarter of 2005, as compared to a negative 3.5 percent in the prior-year period and 18.8 percent in the second quarter of 2005. The company had two one-time items in the third quarter that combined for a $900,000 favorable tax impact. The income tax rate in the third quarter of 2005, without adjusting the one-time items, was 19.7 percent. Syntel's income from operations was 21.7 percent in the third quarter, compared to 23.0 percent in the prior-year quarter and 20.5 percent in the second quarter. Net income for the third quarter was $11.7 million or $0.29 per diluted share, compared to $11.9 million or $0.29 per diluted share in the prior-year period, and $9.7 million or $0.24 per diluted share in the second quarter of 2005. "Our solid financial performance in the third quarter is validation that our aggressive investment program in the areas of people, process, infrastructure and new offerings is delivering the desired results," said Syntel CEO Bharat Desai. "We will continue to focus on driving enhanced value for our clients, through the enlightened use of new technology, best-in-class processes and our high quality teams." Syntel added five new corporate clients in the third quarter, started 87 new engagements, and signed two new "Hunting Licenses" or preferred partnership agreements. Global headcount grew to 5,536 in the third quarter of 2005, compared to 4,920 in the second quarter 2005. Syntel's financial position remains very strong. The Company ended the quarter with more than $118 million in cash and short-term investments. The Company remains debt free. UPDATED 2005 OUTLOOK Based on the third quarter results and current visibility levels, the Company now expects the 2005 revenue, in the range of $222-$225 million and EPS between $0.96 and $1.01. SYNTEL TO HOST CONFERENCE CALL Syntel will discuss its third quarter performance today on a conference call at 10:00 a.m. (Eastern). To listen to the call, please dial (888) 689-9220. The call will also be broadcast live via the Internet at Syntel's web site: www.syntelinc.com under the "Investor Relations" section. Please go to the web site at least 15 minutes prior to the call start time to register and download any necessary audio software. A replay will be available by dialing (800) 642-1687 and entering "1054802" from 1:00 p.m. on October 27, 2005 until midnight on November 3, 2005. International callers may dial (706) 645-9291 and enter the same pass code. ABOUT SYNTEL Syntel (NASDAQ: SYNT) is a leading global provider of custom outsourcing solutions in a broad spectrum of information technology and information technology-enabled services. The Company's vertical practices support the entire Design-Build-Operate-Optimize lifecycle of systems and processes for corporations in the Financial Services, Insurance, Retail, Health Care and Automotive industries. The first US-based firm to launch a Global Delivery Service to drive speed-to-market and quality advantages for its customers, Syntel now leverages this efficient model for the majority of its Global 2000 customers. Recently named one of Forbes Magazine's "Best 200 Small Companies in America," Syntel has more than 5,500 employees worldwide, is assessed at Level 5 of the SEI's CMMI, BS 7799-2:2002 as well as ISO 9001:2000 certified. To learn more, visit us at: www.syntelinc.com. SAFE HARBOR PROVISION This news release includes forward-looking statements, including 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 Form 10-K document dated March 15, 2005. Factors that could cause results to differ materially from those set forth above include general trends and developments in the information technology industry, which is subject to rapid technological changes, and the Company's concentration of sales in a relatively small number of large customers, as well as intense competition in the information technology industry, which the Company believes will increase. SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------ ------------------- 2005 2004 2005 2004 ------- ------- -------- -------- Net Revenues $58,501 $46,602 $163,910 $137,537 Cost of revenues 35,298 27,014 97,756 79,333 ------- ------- -------- -------- GROSS PROFIT 23,203 19,588 66,154 58,204 Selling, general and administrative expenses 10,533 8,850 32,397 26,511 ------- ------- -------- -------- Income from operations 12,670 10,738 33,757 31,693 Other income, principally interest 810 753 2,654 2,106 ------- ------- -------- -------- Income before income taxes 13,480 11,491 36,411 33,799 Provision for income taxes 1,741 (402) 5,992 3,179 ------- ------- -------- -------- Net income $11,739 $11,893 $ 30,419 $ 30,620 ======= ======= ======== ======== Dividend per share $ 0.06 $ 0.06 $ 1.68 $ 0.18 EARNINGS PER SHARE : Basic $ 0.29 $ 0.30 $ 0.75 $ 0.76 Diluted $ 0.29 $ 0.29 $ 0.75 $ 0.76 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING : Basic 40,576 40,236 40,487 40,205 ======= ======= ======== ======== Diluted 40,669 40,335 40,588 40,486 ======= ======= ======== ========
SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER, 30 DECEMBER, 31 2005 2004 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 90,592 $109,142 Short term investments 27,865 58,899 Accounts receivable, net of allowances for doubtful accounts of $1,511 and $1,213 at September 30, 2005 and December 31, 2004, respectively 32,909 28,790 Revenue earned in excess of billings 9,045 4,390 Deferred income taxes and other current assets 9,836 5,891 -------- -------- Total current assets 170,247 207,112 Property and equipment 48,524 37,754 Less accumulated depreciation 24,499 21,290 -------- -------- Property and equipment, net 24,025 16,464 Goodwill 906 906 Deferred income taxes and other noncurrent assets 755 2,486 -------- -------- $195,933 $226,968 ======== ======== LIABILITIES Current liabilities: Accrued payroll and related costs $ 16,463 $ 13,963 Income taxes payable 6,361 6,290 Accounts payable and other current liabilities 14,165 10,842 Deferred revenue 3,628 5,231 -------- -------- Total current liabilities 40,617 36,326 SHAREHOLDERS' EQUITY Total shareholders' equity 155,316 190,642 -------- -------- Total liabilities and shareholders' equity $195,933 $226,968 ======== ========