EX-99.1 2 k02414exv99w1.txt PRESS RELEASE DATED FEBRUARY 13, 2006 EXHIBIT 99.1 SYNTEL REPORTS FOURTH QUARTER AND 2005 FINANCIAL RESULTS HIGHLIGHTS: - Year-over-year revenue increase of more than 21% to $226.2M - Sequential revenue growth of 6.5%, to $62.3M - Year-end global headcount crossed the 6,000 mark - 2005 ending cash balance & short term investments of $120.5M TROY, Mich., February 13, 2006 -- Syntel, Inc. (SYNT), a global information technology services firm, today announced financial results for the fourth quarter and 2005, ended December 31, 2005. FOURTH QUARTER 2005 FINANCIAL HIGHLIGHTS Syntel's total revenue for the fourth quarter increased 27 percent to $62.3 million, compared to $49.0 million in the prior-year period and 6.5 percent sequentially from $58.5 million in the third quarter of 2005. The Company's gross margin was 40.1 percent in the fourth quarter of 2005, compared to 43.3 percent in the prior-year period and 39.7 percent in the third quarter of 2005. Gross margins during the quarter were favorably impacted by $940,000 related to a reversal of a payroll tax provision. During the fourth quarter, Syntel's focus area of Applications Outsourcing accounted for 75 percent of total revenue, with e-Business contributing 14 percent, TeamSourcing at 7 percent, and Business Process Outsourcing (BPO) at 4 percent. The Company's Selling, General and Administrative (SG&A) expenses were 19.9 percent in the fourth quarter of 2005, compared to 21.4 percent in the prior-year period and 18.0 percent in the third quarter of 2005. Expenses during the quarter included a charge of $1.1 million relating to allowances for doubtful accounts. During the fourth quarter, Syntel repatriated approximately $61 million in earnings of its foreign subsidiary, Syntel Limited, under the American Jobs Creation Act of 2004. The Act provides a special one-time favorable effective tax rate for U.S. Corporations. As a result, the Company incurred a $12.3 million tax expense in the quarter. This had a ($0.30) effect on the earnings per share. Syntel's income from operations was 20.2 percent in the fourth quarter, compared to 21.9 percent in the prior-year quarter and 21.7 percent in the third quarter. Net loss for the fourth quarter was $98,000, or $0.00 per diluted share, compared to net income of $10.4 million or $0.26 per diluted share in the prior-year period and net income of $11.7 million or $0.29 per diluted share in the third quarter of 2005. Syntel added four new clients and launched 95 engagements during the fourth quarter of 2005. The Company also added two new "Hunting Licenses" or preferred partnership agreements. 2005 FINANCIAL HIGHLIGHTS Revenue for 2005 increased more than 21 percent to $226.2 million, from $186.6 million in 2004. Net income for the year was $30.3 million, or $0.75 per diluted share compared to $41.0 million or $1.01 per diluted share in 2004. The Company's gross margin was 40.3 percent for 2005, compared to 42.6 percent in 2004. Syntel's global headcount grew 35 percent in 2005 to 6,093, compared to 4,527 at the end of 2004. The Company finished 2005 with cash and short-term investments of $120.5 million. Syntel added 16 new clients in 2005 and launched 452 new engagements. The Company added eight new "Hunting Licenses" or preferred partnership agreements during the year, taking the total to 71 strategic relationships. OPERATIONAL HIGHLIGHTS "In 2005, Syntel reached the 25 years in business milestone and we can't think of a better way to celebrate than by achieving solid performance across the entire organization," said Syntel Chairman and CEO Bharat Desai. "Specifically, our financial performance in 2005 illustrates that Syntel's focus on investments in our People, Infrastructure and New Service Offerings is showing the desired results." "Syntel continues to invest ahead of the curve in new facilities, adding key domain expertise, and creating new solutions for our clients," said Syntel Chief Operating Officer Keshav Murugesh. "We will continue to partner closely with our Blue Chip clients to help them leverage our global delivery model for even greater gains in their businesses." 2006 GUIDANCE Based on current visibility levels, the Company expects 2006 revenue in the range of $250-$260 million and EPS between $1.00 to $1.05. 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 "4214704" from 1:00 p.m. on February 13, 2006 until midnight on February 20, 2006. 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 6,093 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. Income Statement and Balance Sheet to follow. SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
3 MONTHS 12 MONTHS ENDED DECEMBER 31 ENDED DECEMBER 31 ------------------------ ---------------------------- 2005 2004 2005 2004 ---- ---- ---- ---- Net Revenues $ 62,279 $ 49,036 $ 226,189 $ 186,573 Cost of revenues 37,287 27,787 135,043 107,120 --------- --------- ----------- ----------- Gross Profit 24,992 21,249 91,146 79,453 Selling, general and administrative expenses 12,408 10,488 44,805 36,999 --------- --------- ----------- ----------- Income from operations 12,584 10,761 46,341 42,454 Other income, principally interest 1,938 1,667 4,592 3,773 --------- --------- ----------- ----------- Income before income taxes 14,522 12,428 50,933 46,227 Provision for income taxes 14,508 2,074 20,500 5,253 --------- --------- ----------- ----------- Income before Minority Interest 14 10,354 30,433 40,974 Minority Interest 112 0 112 0 --------- --------- ----------- ----------- Net ( loss ) / income $ (98) $ 10,354 $ 30,321 $ 40,974 ========= ========= =========== =========== Dividend Per Share : $ 0.06 $ 0.06 $ 1.74 $ 0.24 EARNINGS PER SHARE : Basic $ (0.00) $ 0.26 $ 0.75 $ 1.02 Diluted $ (0.00) $ 0.26 $ 0.75 $ 1.01 Weighted average common shares outstanding : Basic 40,650 40,248 40,528 40,216 ========= ========= =========== =========== Diluted 40,838 40,416 40,651 40,469 ========= ========= =========== ===========
SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER, 31 DECEMBER, 31 2005 2004 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 99,390 $ 109,142 Short term investments 21,083 58,899 Accounts receivable, net of allowances for doubtful accounts of $ 2,575 and $1,213 at December 31, 2005 and December 31,2004, respectively 27,907 28,790 Revenue earned in excess of billings 8,366 4,390 Deferred income taxes and other current assets 10,003 5,891 ------------- ------------- Total current assets 166,749 207,112 Property and equipment 54,690 37,754 Less accumulated depreciation 25,504 21,290 ------------- ------------- Property and equipment, net 29,186 16,464 Goodwill 906 906 Deferred income taxes and other noncurrent assets 1,320 2,486 ------------- ------------- $ 198,161 $ 226,968 ============= ============= LIABILITIES Current liabilities: Accrued payroll and related costs $ 15,906 $ 13,963 Income taxes payable 9,809 6,290 Accounts payable and other current liabilities 16,812 10,842 Deferred revenue 3,356 5,231 ------------- ------------- Total liabilities 45,883 36,326 SHAREHOLDERS' EQUITY Total shareholders' equity 152,278 190,642 ------------- ------------- Total liabilities and shareholders' equity $ 198,161 $ 226,968 ============= =============