Revenues of $121 million and Gross Profit of 40% BOSTON, Nov. 5
/PRNewswire-FirstCall/ -- Stream Global Services, Inc., (NYSE Amex:
SGS), a premium business process outsource (BPO) service provider
specializing in customer relationship management services for
Fortune 1000 companies, today announced consolidated financial
results for its 2009 third quarter ended September 30, 2009. These
results do not include any financial results for Stream's purchase
of eTelecare Global Solutions and the related financings of
approximately $300 million that were completed on October 1, 2009.
Results for eTelecare and related financings will be included for
the period October 1, 2009 to December 31, 2009 in our fourth
quarter 2009 financial results. GAAP Consolidated Results On a GAAP
basis, revenue for the three and nine months ended September 30,
2009 was $121.9 million and $383.2 million, respectively, as
compared to $81.5 million in the three and nine months ended
September 30, 2008 due to our acquisition of Stream Holdings
Corporation on July 31, 2008. GAAP net loss was $6.8 million and
$7.6 million for the three and nine months ended September 30,
2009, respectively, as compared GAAP net loss of $0.9 million and
net income of $0.9 million for the three and nine months ended
September 30, 2008. Pro Forma Combined Consolidated Results On a
pro forma combined consolidated basis, (giving effect to the
Company's acquisition of SHC as if it occurs on January 1, 2008),
the Company posted revenue for the three and nine months ended June
30, 2009 of $121.9 million and $383.2 million, as compared to
$124.5 million and $393.6 million in the three and nine months
ended September 30, 2008, respectively. Revenue for the nine months
ended September 30, 2008 included approximately $23 million, from
clients that were lost prior to the acquisition of SHC on July 31,
2008. Stream's gross profit as a percentage of revenue increased to
40% and 42% in the three and nine months ended September 30, 2009,
respectively, compared to 37% and 36% in the three and nine months
ended September 30, 2008, respectively. For the three and nine
months ended September 30, 2009, adjusted pro forma earnings before
interest taxes depreciation and amortization ("Adjusted EBITDA")
increased 8% and 63% to $7.1 million and $33.5 million,
respectively, compared to $6.6 million and $20.6 million in the
year-earlier periods. Adjusted EBITDA as a percentage of revenue
for the three and nine months ended September 30, 2009 was 5.8% and
8.7%, respectively, compared to 5.3% and 5.2% for the three and
nine months ended September 30, 2008. See attached reconciliation
for description of adjustments to EBIDTA and reconciliation to net
income. Scott Murray, Chairman and Chief Executive Officer of
Stream said, "We are pleased with the progress we have made over
the past year. We have been able to improve our gross margins by
600 bps over last year's nine-month comparable period and have won
a number of new accounts in the telecommunications, wireless and
computing segments. We have also further expanded our geographic
footprint into places such as Tunis, the Philippines and Cairo.
During the third quarter of 2009, we ramped both new client
accounts and new service centers. These activities required us to
invest in shared service, recruiting, training, and technology
costs at a higher rate than prior periods. These amounts were fully
expensed during the current quarter and will benefit future periods
by higher revenues and margins. We continue to see progress in our
business, however, the effects of the global recession are still
impacting our operations and resulting revenues from our clients.
We expect to see a very gradual improvement in our business over
the next several months due to both seasonal increases and
improvements in the general economic environment." Murray went on
to say, "We are also pleased to complete the combination with
eTelecare on October 1, 2009 and financings totaling almost $300
million (including a $200 million high yield bond and an undrawn
$100 million Asset Based Revolving Line of Credit). This now
positions Stream with a very broad geographic global footprint,
including North America, Latin America, Africa, Europe, India and
the Philippines. With approximately 30,000 employees in 50 global
service centers we now provide very diverse services for all of our
global clients needs ranging from sales services to customer care
to technical support and customer lifecycle management." Stream
will hold a conference call for investors on November 5, 2009 at
4:30 PM EST. Investors can participate by calling 800-344-6491,
passcode: 8163948. Contact Information: Sally Comollo Director of
Marketing Communications 781-304-1847 About Stream Global Services:
Stream Global Services is a premium business process outsource
(BPO) service provider specializing in customer relationship
management services including sales, customer care and technical
support for Fortune 1000 companies. Stream is a trusted partner to
some of the world's leading technology, computing,
telecommunications, retail, entertainment/media, and financial
services companies. Our service programs are delivered through a
set of standardized best practices and sophisticated technologies
by a highly skilled workforce of approximately 30,000 employees
based out of 50 solution centers in 22 countries supporting more
than 30 languages. Stream continues to expand its global presence
and service offerings to increase revenue, improve operational
efficiencies and drive brand loyalty for its clients. To learn more
about the company and its complete service offering, please visit
http://www.stream.com/. Safe Harbor. This press release contains
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995,
including forward-looking statements regarding our business
expectations and objectives. These statements are neither promises
nor guarantees and involve risks and uncertainties that could cause
actual results to differ materially from those set forth in the
forward-looking statements, including, without limitation, risks
relating to our ability to maintain and win additional client
business, continue to maintain our operating performance and margin
expansion, continue to have sufficient capital to grow and maintain
our business, retain our management team and effectively operate a
global franchise across multiple jurisdictions plus other risks
detailed in our filings with the SEC, including those discussed in
the Company's Annual report filed with the SEC on Form 10-K for the
year ended December 31, 2008 and Registration Statement on Form S-3
filed with the SEC on October 21, 2009. Stream does not intend, and
disclaims any obligation, to update any forward-looking information
contained in this release, even if its estimates change. The
required reconciliations and other disclosures for all non-GAAP
measures used by the Company are set forth in a schedule attached
to this press release and in the Current Report on Form 8-K
furnished to the SEC on the date hereof. References to the
financial information included in this news release reflect rounded
numbers and should be considered approximate values. Non-GAAP
Financial Information This release contains non-GAAP financial
measures. These non-GAAP financial measures, which are used as
measures of Stream's performance or liquidity, should be considered
in addition to, not as a substitute for, measures of Stream's
financial performance or liquidity prepared in accordance with
GAAP. Non-GAAP financial measures may be defined differently from
time to time and may be defined differently than similar terms used
by other companies, and accordingly, care should be exercised in
understanding how SGSI defines non-GAAP financial measures in this
release. Where specified in the accompanying schedules for various
periods entitled "Reconciliation of GAAP to Non-GAAP Information,"
certain items noted on each such specific schedule are excluded
from the non-GAAP financial measures. Stream's management uses the
non-GAAP financial measures in the accompanying schedules to gain
an understanding of Stream's comparative operating performance
(when comparing such results with previous periods or forecasts)
and future prospects and excludes certain items from its internal
financial statements for purposes of its internal budgets and
financial goals. These non-GAAP financial measures are used by
Stream's management in their financial and operating
decision-making because management believes they reflect Stream's
ongoing business in a manner that allows meaningful
period-to-period comparisons. Stream's management believes that
these non-GAAP financial measures provide useful information to
investors and others in (a) understanding and evaluating Stream's
current operating performance and future prospects in the same
manner as management does, if they so choose, and (b) in comparing
in a consistent manner Stream's current financial results with its
past financial results. All of the foregoing non-GAAP financial
measures have limitations. Specifically, the non-GAAP financial
measures that exclude certain items do not include all items of
income and expense that affect Stream's operations. Further, these
non-GAAP financial measures are not prepared in accordance with
GAAP, may not be comparable to non-GAAP financial measures used by
other companies and do not reflect any benefit that such items may
confer on Stream. Management compensates for these limitations by
also considering Stream's financial results in accordance with
GAAP. STREAM GLOBAL SERVICES, INC. CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS (in thousands, except per share data)
(unaudited) Three Months Nine Months Ended Ended September 30,
September 30, --------------- -------------- 2009 2008 2009 2008
---- ---- ---- ---- Revenue $121,875 $81,537 $383,159 $81,537
Direct cost of revenue 72,568 50,529 224,587 50,529 ------ ------
------- ------ Gross profit 49,307 31,008 158,572 31,008 ------
------ ------- ------ Operating expenses: Selling, general and
administrative expenses 42,110 25,647 127,828 26,194 Transaction
related expenses 2,992 - 2,992 - Depreciation expense 4,579 2,741
13,979 2,748 Amortization expense 2,685 1,249 6,862 1,249 -----
----- ----- ----- Income (loss) from operations (3,059) 1,371 6,911
817 Interest expense (income) and other financial costs 2,731 533
8,240 (2,952) ----- --- ----- ------ Income (loss) before provision
for income taxes (5,790) 838 (1,329) 3,769 Provision for income
taxes 986 1,757 6,314 2,827 --- ----- ----- ----- Net income (loss)
$(6,776) $(919) $(7,643) $942 Preferred stock beneficial conversion
feature, accretion and dividends 2,582 50,599 6,261 50,599 -----
------ ----- ------ Net income (loss) available to common
shareholders: (9,358) (51,518) (13,904) (49,657) ====== =======
======= ======= Basic and Diluted income (loss) per share $(0.99)
$(2.12) $(1.47) $(1.78) ====== ====== ====== ====== Shares used in
computing per share data: Basic and Diluted shares 9,446 24,347
9,450 27,907 Note: Prior to July 31, 2008 SGS was a development
stage company and had no operations. STREAM GLOBAL SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited) (in thousands)
September December 30, 2009 31, 2008 Assets Current assets: Cash
and cash equivalents $16,742 $10,660 Accounts receivable, net
109,009 109,385 Other current assets 24,699 26,811 ------ ------
Total current assets 150,450 146,856 Equipment and fixtures, net
48,340 41,634 Goodwill, intangible assets, and other long-term
assets 141,854 141,455 ------- ------- Total assets $340,644
$329,945 ======== ======== Liabilities and Stockholders' Equity
Current liabilities $78,683 $79,392 Long-term debt 81,126 63,624
Capital lease obligations 9,212 5,484 Deferred income taxes 16,233
17,396 Other long-term liabilities 13,347 16,387 ------ ------
Total liabilities 198,601 182,283 Stockholders' equity and
preferred stock * 142,043 147,662 ------- ------- Total liabilities
and stockholders' equity $340,644 $329,945 ======== ======== * June
30, 2009 and December 31, 2008 includes $721 and $145,911 of
redeemable convertible preferred stock, respectively. STREAM GLOBAL
SERVICES, INC. PRO FORMA COMBINED CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS (unaudited) (in thousands) Three Months Nine Months
Ended Ended September 30, September 30, --------------
-------------- 2009 2008 2009 2008 ---- ---- ---- ---- (Non-GAAP
Pro forma) --------------------- Revenue $121,875 $124,536 $383,159
$393,622 Direct costs of revenue 72,769 78,518 223,546 252,922
------ ------ ------- ------- Gross profit 49,106 46,018 159,613
140,700 ------ ------ ------- ------- Gross profit as a percentage
of revenue 40% 37% 42% 36% Operating expenses: Selling, general and
administrative expenses 41,984 39,433 126,872 120,118 Stock-based
compensation expense 208 26 531 1,234 Transaction related expenses
2,992 - 2,992 - Depreciation expense 4,579 4,500 13,979 14,496
Amortization expense 2,685 1,438 6,862 2,877 ----- ----- -----
----- 52,448 45,397 151,236 138,725 ------ ------ ------- -------
Income (loss) from operations (3,342) 621 8,377 1,975 Interest
expense (income) and other financial costs 2,448 819 9,706 6,321
----- --- ----- ----- Income (loss) before provision for income
taxes (5,790) (198) (1,329) (4,346) Provision for income taxes 986
2,528 6,314 6,497 --- ----- ----- ----- Net income (loss) $(6,776)
$(2,726) $(7,643) $(10,843) ====== ====== ====== ======= Adjusted
EBITDA Income (loss) from operations $(3,342) $621 $8,377 $1,975
Depreciation and amortization expense 7,264 5,938 20,841 17,373
Restructuring severance expense - - 735 - Transaction related
expenses 2,992 - 2,992 - Stock-based compensation expense 208 26
531 1,234 ------ ------ ------- ------- Adjusted EBITDA $7,122
$6,585 $33,476 $20,582 ====== ====== ======= ======= STREAM GLOBAL
SERVICES, INC. RECONCILIATION OF GAAP TO NON-GAAP PRO FORMA
INFORMATION (unaudited) (in thousands) Three Months Nine Months
Ended Ended September 30, September 30, --------------
-------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net Income
(loss) $(6,776) $(919) $(7,643) $942 Add (deduct) items to
reconcile to non-GAAP adjusted EBITDA: Provision for income taxes
986 1,757 6,314 2,827 Pro forma depreciation and amortization 7,264
5,938 20,841 17,373 Interest expense (income) and financial costs
2,731 533 8,240 (2,952) Realized foreign exchange gains (283) 265
1,466 397 Restructuring severance - - 735 - Transaction related
expenses 2,992 - 2,992 - Stock-based compensation expenses 208 26
531 1,234 Operating income (loss) from SHC for the period prior to
the acquisition of July 31, 2008, excluding depreciation and
amortization - (1,015) - 761 --- ------ --- ----- Adjusted EBITDA
$7,122 $6,585 $33,476 $20,582 =============== ====== ====== =======
======= Direct cost of revenue $72,568 $78,835 $224,587 $253,016
Add (deduct) items to reconcile to non-GAAP adjusted EBITDA:
Foreign exchange gains 201 (317) (1,041) (94) --- ---- ------ ---
Adjusted direct cost of revenue $72,769 $78,518 $223,546 $252,922
======= ======= ======== ======== Gross profit $49,307 $45,701
$158,572 $140,606 Add (deduct) items to reconcile to non-GAAP
adjusted EBITDA: Foreign exchange gains (201) 317 1,041 94 ---- ---
----- -- Adjusted gross profit $49,106 $46,018 $159,613 $140,700
======= ======= ======== ======== Selling, general and
administrative expenses $42,110 $39,707 $127,828 $120,446 Add
(deduct) items to reconcile to non-GAAP adjusted EBITDA:
Stock-based compensation (208) (145) (531) (290) Foreign exchange
gains 82 (129) (425) (38) -- ---- ---- --- Selling, general and
administrative expenses $41,984 $39,433 $126,872 $120,118 =======
======= ======== ======== Income (loss) from operations $(3,059)
$175 $6,911 $1,843 Add (deduct) items to reconcile to non-GAAP
adjusted EBITDA: Foreign exchange gains (283) 446 1,466 132 ----
--- ----- --- Income (loss) from operations $(3,342) $621 $8,377
$1,975 ======= ==== ====== ====== Interest expense (income) and
other financial costs $2,731 $373 $8,240 $6,189 Add (deduct) items
to reconcile to non-GAAP adjusted EBITDA: Foreign exchange gains
(283) 446 1,466 132 ---- --- ----- --- Interest expense (income)
and other financial costs $2,448 $819 $9,706 $6,321 ====== ====
====== ====== DATASOURCE: Stream Global Services, Inc. CONTACT:
Sally Comollo, Director of Marketing Communications of Stream
Global Services, Inc., +1-781-304-1847, Web Site:
http://www.stream.com/
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