TAMPA, Fla., Nov. 3, 2008 (GLOBE NEWSWIRE) -- Sykes Enterprises, Incorporated ("SYKES" or the "Company") (Nasdaq:SYKE), a global leader in providing outsourced customer contact management solutions and services in the business process outsourcing (BPO) arena, announced today its financial results for the third-quarter of 2008, the highlights of which are as follows:
Third Quarter Third Quarter
(In millions, except per share data) 2008 2007
Revenues $207.1 $176.1
Income from Operations $19.3 $14.9
Net Income $19.5 $12.3
EPS $0.47 $0.30
* Third quarter 2008 comparable revenue growth rate of 17.6% was
split between existing and new client relationships at roughly
70% and 30%, respectively
* Third quarter 2008 comparable revenue growth remained broad based,
with top-40 clients, which represented over 80% of total revenues,
up 28%, reflecting continued strong demand, as well as high quality
and disciplined operational execution
* Cash and cash equivalents at quarter-end totaled approximately
$220.1 million, and the Company remained debt free
Americas
Revenues generated from the Company's Americas segment, including operations in North America and offshore (Latin America and the Asia Pacific region), increased 14.9% to $138.6 million, or 66.9% of total revenues, for the third quarter of 2008. Revenues for the comparable prior-year period totaled $120.6 million, or 68.5% of total revenues. The comparable revenue increase reflects sustained growth in customer care demand from existing and new client programs, most notably within the financial services, communications, transportation and technology verticals. Approximately 62% of Americas' third quarter 2008 revenues was generated from services provided offshore compared to approximately 61% in the prior year quarter.
The Americas income from operations for the third quarter of 2008 was up 14.8% to $22.2 million, with the operating margin at 16.0% versus 16.1% in the comparable quarter last year. The Americas operating margins remained virtually unchanged due principally to higher compensation and client ramp-up costs, offsetting lower facilities and telephony costs, as well as lower depreciation expense.
EMEA
Revenues from the Company's Europe, Middle East and Africa (EMEA) region increased 23.3% to $68.5 million, representing 33.1% of SYKES' total revenues for the third quarter of 2008 compared to $55.5 million, or 31.5%, in the prior year's third quarter. The $13.0 million comparable revenue increase was split between growth in customer care demand of $9.5 million and the contribution from a stronger Euro of $3.5 million. The demand was across the technology, transportation, financial services and communications verticals, partially resulting from higher-than-anticipated demand on certain existing client programs as well as the addition of new client programs.
The EMEA income from operations for the third quarter of 2008 was up 51.5% to $7.1 million, with the operating margin at 10.3% versus 8.4% in the comparable quarter last year. The 190 basis points comparable increase in the EMEA operating margin was due to a combination of higher-than-anticipated revenue growth and cost controls, including lower compensation, facilities and recruiting costs, as well as lower depreciation expense.
Corporate G&A Expenses
Corporate costs increased 9.9% to $10.1 million, but declined to 4.9% of revenues, in the third quarter of 2008, compared to $9.2 million, or 5.2% of revenues, in the comparable quarter last year. Although corporate costs declined 30 basis points as a percentage of revenues, the 9.9% comparable increase was partly due to higher compensation costs, combined with an increase in investments in sales, marketing and operations initiatives.
Other Income and Taxes
Other income for the third quarter of 2008 totaled approximately $4.0 million compared to other income of $1.2 million for the same period in the prior year. The $2.8 million increase in other income was primarily attributable to an increase in realized and unrealized foreign currency transactions gains. These gains resulted primarily from U.S. dollar denominated assets and liabilities held by the Company's foreign subsidiaries.
The Company's third quarter effective tax rate was 16.0% versus 23.6% in the same period last year and below the 17% to 18% range provided in the Company's third quarter 2008 business outlook. The decrease in the effective tax rate in both cases was due principally to a shift in the geographic mix of higher-than-anticipated earnings to lower tax rate jurisdictions.
Liquidity and Capital Resources
Approximately $202.7 million, or 92%, of the Company's September 30 cash balance of $220.1 million was held in international operations and would be subject to additional taxes if repatriated back to the U.S. At September 30, 2008, the Company also had $50 million of capacity available under its credit facility. Cash flow from operations more than doubled to $26.7 million in third quarter 2008 due largely to increases in net income and non-cash reconciliation items.
Business Outlook
The company continues to convert its sales pipeline into new program wins within the communications, financial services and technology verticals. To accommodate some of the new wins, the Company plans to add approximately 700 seats in the fourth quarter.
The fourth quarter 2008 revenue and earnings per share outlook, however, is impacted by the following factors:
* The extreme volatility in the foreign currency markets. With the rapid and continued appreciation in the U.S. dollar against the Euro, the Company's fourth quarter revenue assumptions now reflect the Euro trading in a narrow band of $1.29-$1.32/1 dollar/Euro exchange rate, down approximately 16% from the original forecast of $1.55/1. Therefore, the revenue impact from a strengthening U.S. dollar is expected to be between $12 million and $13 million, with an estimated unfavorable earnings per share impact of $0.02 to $0.03; and * Expenses related to new seat additions and the ramp-up of seats added in the third and fourth quarters of 2008. Considering the above factors, the Company anticipates the following financial results for the three months ended December 31, 2008: * Revenues in the range of $195 million to $200 million * Tax rate of approximately 17% to 18% * EPS in the range of $0.30 to $0.32 per diluted share * Capital expenditures in the range of $7.0 million to $9.0 million For the twelve months ended December 31, 2008, the Company anticipates the following financial results: * Revenues in the range of $813 million to $818 million * Tax rate of approximately 17% to 18% * EPS in the range of $1.59 to $1.61 per diluted share * Capital expenditures in the range of $33.0 million to $35.0 million
Conference Call
The Company will conduct a conference call regarding the content of this release tomorrow, November 4, 2008 at 10:00 a.m. Eastern Time. The conference call will be carried live on the Internet. Instructions for listening to the call over the Internet are available on the Investors page of SYKES' website at www.sykes.com. A replay will be available at this location for two weeks. This press release is also posted on the SYKES website at http://investor.sykes.com/releases.cfm.
About Sykes Enterprises, Incorporated
SYKES is a global leader in providing customer contact management solutions and services in the business process outsourcing (BPO) arena. SYKES provides an array of sophisticated customer contact management solutions to Fortune 1000 companies around the world, primarily in the communications, financial services, healthcare, technology and transportation and leisure industries. SYKES specializes in providing flexible, high quality customer support outsourcing solutions with an emphasis on inbound technical support and customer service. Headquartered in Tampa, Florida, with customer contact management centers throughout the world, SYKES provides its services through multiple communication channels encompassing phone, e-mail, web and chat. Utilizing its integrated onshore/offshore global delivery model, SYKES serves its clients through two geographic operating and reporting segments: the Americas (United States, Canada, Latin America and the Asia Pacific region) and EMEA (Europe, Middle East and Africa). SYKES also provides various enterprise support services in the Americas and fulfillment services in EMEA, which include multi-lingual sales order processing, payment processing, inventory control, product delivery and product returns handling. For additional information please visit www.sykes.com.
Forward-Looking Statements
This press release may contain "forward-looking statements," including SYKES' estimates of future business outlook, prospects or financial results, statements regarding SYKES' objectives, expectations, intentions, beliefs or strategies, or statements containing words such as "believe," "estimate," "project," "expect," "intend," "may," "anticipate," "plans," "seeks," or similar expressions. It is important to note that SYKES' actual results could differ materially from those in such forward-looking statements, and undue reliance should not be placed on such statements. Among the important factors that could cause such actual results to differ materially are (i) the timing of significant orders for SYKES' products and services, (ii) variations in the terms and the elements of services offered under SYKES' standardized contract including those for future bundled service offerings, (iii) changes in applicable accounting principles or interpretations of such principles, (iv) difficulties or delays in implementing SYKES' bundled service offerings, (v) failure to achieve sales, marketing and other objectives, (vi) construction delays of new or expansion of existing customer support centers, (vii) delays in the Company's ability to develop new products and services and market acceptance of new products and services, (viii) rapid technological change, (ix) loss or addition of significant clients, (x) political and country-specific risks inherent in conducting business abroad, (xi) currency fluctuations, (xii) fluctuations in global business conditions and the global economy, (xiii) SYKES' ability to attract and retain key management personnel, (xiv) SYKES' ability to continue the growth of its support service revenues through additional technical and customer contact centers, (xv) SYKES' ability to further penetrate into vertically integrated markets, (xvi) SYKES' ability to expand its global presence through strategic alliances and selective acquisitions, (xvii) SYKES' ability to continue to establish a competitive advantage through sophisticated technological capabilities, (xviii) the ultimate outcome of any lawsuits or penalties (regulatory or otherwise), (xix) SYKES' ability to recognize deferred revenue through delivery of products or satisfactory performance of services, (xx) SYKES' dependence on trends toward outsourcing, (xxi) risk of interruption of technical and customer contact management center operations due to such factors as fire, earthquakes, inclement weather and other disasters, power failures, telecommunications failures, unauthorized intrusions, computer viruses and other emergencies, (xxii) the existence of substantial competition, (xxiii) the early termination of contracts by clients, (xxiv) the ability to obtain and maintain grants and other incentives, including tax holidays or otherwise, (xxv) the impact of economic recessions in the U.S. and other parts of the world, and (xxvi) other risk factors listed from time to time in SYKES' registration statements and reports as filed with the Securities and Exchange Commission. All forward-looking statements included in this press release are made as of the date hereof, and SYKES undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise.
Sykes Enterprises, Incorporated
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended
Sept. 30, Sept. 30,
2008 2007
-------- --------
Revenues $207,066 $176,122
Direct salaries and related costs (130,509) (110,774)
General and administrative (57,304) (50,463)
-------- --------
Income from operations 19,253 14,885
Other income, net 3,964 1,151
-------- --------
Income before provision for income taxes 23,217 16,036
Provision for income taxes (3,725) (3,780)
-------- --------
Net income $ 19,492 $ 12,256
======== ========
Net income per basic share $ 0.48 $ 0.30
Shares outstanding, basic 40,678 40,432
Net income per diluted share $ 0.47 $ 0.30
Shares outstanding, diluted 41,070 40,697
Sykes Enterprises, Incorporated
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Nine Months Ended
Sept. 30, Sept. 30,
2008 2007
-------- --------
Revenues $618,416 $512,407
Direct salaries and related costs (395,197) (327,109)
General and administrative (171,083) (149,369)
--------- ---------
Income from operations 52,136 35,929
Other income, net 11,081 2,680
--------- ---------
Income before provision for income taxes 63,217 38,609
Provision for income taxes (10,286) (8,217)
--------- ---------
Net income $ 52,931 $ 30,392
========= =========
Net income per basic share $ 1.30 $ 0.75
Shares outstanding, basic 40,590 40,360
Net income per diluted share $ 1.29 $ 0.75
Shares outstanding, diluted 40,928 40,624
Sykes Enterprises, Incorporated
Segment Results
(in thousands)
(Unaudited)
Three Months Ended
Sept. 30, Sept. 30,
2008 2007
-------- --------
Revenues:
Americas $138,573 $120,592
EMEA 68,493 55,530
-------- --------
Total $207,066 $176,122
======== ========
Operating Income:
Americas $ 22,237 $ 19,369
EMEA 7,079 4,671
Corporate G&A expenses (10,063) (9,155)
-------- --------
Income from operations 19,253 14,885
Other income, net 3,964 1,151
Provision for income taxes (3,725) (3,780)
-------- --------
Net income $ 19,492 $ 12,256
======== ========
Nine Months Ended
Sept. 30, Sept. 30,
2008 2007
-------- --------
Revenues:
Americas $413,469 $347,797
EMEA 204,947 164,610
-------- --------
Total $618,416 $512,407
======== ========
Operating Income:
Americas $ 66,178 $ 54,940
EMEA 15,764 9,731
Corporate G&A expenses (29,806) (28,742)
-------- --------
Income from operations 52,136 35,929
Other income 11,081 2,680
Provision for income taxes (10,286) (8,217)
-------- --------
Net income $ 52,931 $ 30,392
======== ========
Sykes Enterprises, Incorporated
Condensed Consolidated Balance Sheets
(in thousands)
Sept. 30, Dec. 31,
2008 2007
-------- --------
(Unaudited)
Assets:
Current assets $402,605 $371,732
Property and equipment, net 78,909 78,574
Other noncurrent assets 63,617 55,169
-------- --------
Total assets $545,131 $505,475
======== ========
Liabilities & Shareholders' Equity:
Current liabilities $134,084 $118,379
Noncurrent liabilities 22,561 21,775
Shareholders' equity 388,486 365,321
-------- --------
Total liabilities and shareholders' equity $545,131 $505,475
======== ========
Sykes Enterprises, Incorporated
Supplementary Data
Q3 2008 Q3 2007
-------- --------
Geographic Mix (% of Total Revenues):
Americas (1) 66.9% 68.5%
Europe, Middle East & Africa (EMEA) 33.1% 31.5%
-------- --------
Total: 100.0% 100.0%
(1) Includes the United States, Canada, Latin America and the Asia
Pacific (APAC) Region. Latin America and APAC are included in
the Americas due to the nature of the business and client
profile, which is primarily made up of U.S. based clients.
Q3 2008 Q3 2007
-------- --------
Vertical Industry Mix (% of Total Revenues):
Technology / Consumer 33% 31%
Communications 29% 31%
Financial Services 15% 13%
Transportation & Leisure 10% 8%
Healthcare 6% 7%
Other 7% 10%
-------- ------
Total: 100% 100%
Sykes Enterprises, Incorporated
Cash Flow from Operations
(in thousands)
(Unaudited)
Three Months Ended
Sept. 30, Sept. 30,
2008 2007
-------- --------
Cash Flow From Operating Activities:
Net income $ 19,492 $ 12,256
Depreciation and amortization 6,929 6,282
Changes in assets and liabilities and other 318 (5,918)
--------- ---------
Net cash provided by operating activities $ 26,739 $ 12,620
========= =========
Capital expenditures $ 9,482 $ 8,624
Cash interest paid $ 57 $ 105
Cash taxes paid $ 3,728 $ 2,324
Nine Months Ended
Sept. 30, Sept. 30,
2008 2007
-------- --------
Cash Flow From Operating Activities:
Net income $ 52,931 $ 30,392
Depreciation and amortization 21,125 18,315
Changes in assets and liabilities and other (16,364) (13,494)
-------- --------
Net cash provided by operating activities $ 57,692 $ 35,213
======== ========
Capital expenditures $ 25,730 $ 22,761
Cash interest paid $ 277 $ 184
Cash taxes paid $ 13,702 $ 8,909