Stream Global Services, Inc., (NYSE AMEX: SGS), a leading global
business process outsource (BPO) service provider specializing in
customer relationship management and business process outsourcing
services for Fortune 1000 companies, today announced consolidated
financial results for the three months ended March 31, 2011. On May
4, 2011 Stream also filed its Quarterly Report on Form 10-Q with
the Securities and Exchange Commission for the quarter ended March
31, 2011.
CEO Commentary
Kathryn Marinello, Chairman and Chief Executive Officer of
Stream, said, "Like last quarter, we are delighted with our top
line results. We continue to see strong demand for our services as
demonstrated by the 8% growth in year-over-year revenue for the
quarter. Internally, our focused efforts on improving our
operational performance by motivating and rewarding our employees
is yielding results as demonstrated by our 35% improvement in
year-over-year Adjusted EBITDA."
First Quarter 2011 Financial Highlights
- Revenue for the quarter ended March 31,
2011 was $213 million, an increase of $16 million, or 8%, from the
same period last year. The growth in revenue was a combination of
new clients won in 2010 and expansion with existing clients.
Through April 30, 2011 of this year, Stream has signed an estimated
$38 million, on an annualized basis once fully ramped, of revenue
with both new and existing clients.
- Gross profit increased approximately $7
million, or 8%, over the prior year first quarter. The Gross Profit
percentage for the first quarter was 43% for both 2011 and
2010.
- Income From Operations for the quarter
ended March 31, 2011 was $7 million versus a loss of $3 million for
the same period in 2010. The improvement in operating income
reflects higher gross profit earned on the increased revenue,
improvement in Selling, General and Administrative expenses from
35% of revenue in first quarter 2010 to 32% of revenue in first
quarter 2011, and lower net Severance, Restructuring and Other
Charges.
- Net loss was $2 million for the first
quarter ended March 31, 2011 versus a net loss of $10 million for
the same period in 2010.
- Adjusted Earnings before Interest,
Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was $23
million for the first quarter of 2011, an increase of $6 million
from the first quarter of 2010 ($17 million.) On a year-over-year
constant currency basis, our Adjusted EBITDA would have been higher
by approximately $1 million had there been no change in global
currency rates.
Americas Region
Revenue generated from our Americas region, which includes the
United States, Canada, the Philippines, India, Costa Rica,
Nicaragua, the Dominican Republic and El Salvador, was $154 million
for the first quarter ended March 31, 2011 ($143 million for the
prior year first quarter).
Gross profit generated by the Americas region for the first
quarter 2011 was $70 million ($64 million for the prior year first
quarter) and gross margin for the first quarter of 2011 was 45.5%
(44.8% the prior year first quarter).
EMEA Region
Revenue generated from our EMEA region, which includes Europe,
the Middle East and Africa, for the first quarter of 2011 was $58
million ($53 million for the prior year first quarter).
Gross profit generated by the EMEA region for the first quarter
of 2011 was $20 million with a gross margin of 34.5% ($20 million
and 37.7%, respectively, for the prior year first quarter). The
decrease in the gross profit percentage from the prior year is
primarily due to a decline in the financial performance of our
service centers in Cairo and Tunis resulting from civil unrest in
those geographies. As a result of this civil unrest, the
contribution to Adjusted EBITDA for this region declined by
approximately $1 million from the prior year first quarter and the
fourth quarter of 2010.
Selling, General and Administrative Expense
Selling, general and administrative expenses, which includes
non-agent service center costs, was $69 million (32.3% of revenue)
during the three months ended March 31, 2011 and $69 million (34.9%
of revenue ) during the same period in 2010. This percentage
decrease is attributed to management focus on cost controls,
including cost synergies realized from our integration of eTelecare
Global Solutions, Inc.
Other Income and Expense, Including Income Taxes
Net realized and unrealized foreign exchange gains and losses
were a loss of approximately $1 million for the three months ended
March 31, 2011 versus a gain of approximately $2 million for the
prior year first quarter. The change in net realized and unrealized
foreign exchange gains and losses was primarily a result of
unrealized gains in first quarter 2010 from the effect of changes
in the value of the Philippine Peso relative to the US Dollar on
forward currency contracts that we acquired with the acquisition of
eTelecare in 2009 that were not treated as effective hedges for
financial reporting purposes and, accordingly, were
marked-to-market in income on a quarterly basis. These prior
ineffective hedges have now expired.
Provision for income taxes decreased from $2 million in first
quarter 2010 to $1 million in first quarter 2011. The decrease was
the result of a favorable outcome recorded in first quarter 2011 on
an uncertain tax position.
Liquidity and Capital Resources
At March 31, 2011, cash and cash equivalents, excluding
restricted cash, was $25 million, up from $18 million at year-end.
Days sales outstanding were 71 days at March 31, 2011 versus 73
days at March 31, 2010. The balance on the revolving line of credit
was $10 million at March 31, 2011 versus $25 million at December
31, 2010. At March 31, 2011, the Company had approximately $84
million of availability under its revolving line of credit. For the
quarter ended March 31, 2011, our cash flow from operating
activities was $27 million, an increase of $10 million from the
same period in 2010.
Stream will hold a conference call for investors on May 5, 2011
at 9:00 AM EDT. Investors can participate by calling 1-888-430-8685
and referencing passcode #6813222.
About Stream Global
Services:
Stream Global Services is a leading global 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. Stream’s service programs are delivered through
a set of standardized best practices and sophisticated technologies
by a highly skilled multilingual workforce of over 30,000 employees
capable of supporting over 35 languages across 50 locations in 22
countries. Stream strives 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
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, but 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 the Company’s
ability to maintain and win additional client business, continue to
maintain its operating performance and margin expansion, continue
to have sufficient capital to grow and maintain its business,
retain the Company’s management team and effectively operate a
global franchise across multiple jurisdictions plus other risks
detailed in the Company’s filings with the U.S. Securities and
Exchange Commission (“SEC”), including those discussed in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2010.
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.
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 Stream
defines non-GAAP financial measures in this release.
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) 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
(Unaudited)
(In thousands, except per share
amounts)
Three Months EndedMarch 31, 2011
2010 Revenue $ 212,691 $ 196,575 Direct
cost of revenue 121,953 112,584
Gross profit 90,738 83,991
Operating expenses: Selling, general and administrative
expenses 68,802 68,565 Severance, restructuring and other charges,
net (126 ) 1,609 Depreciation expense 10,191 11,219 Amortization
expense 4,394 5,210 Total
Operating expenses 83,261 86,603
Income (loss) from operations 7,477 (2,612 ) Interest
expense 7,262 7,602 Foreign currency transaction loss (gain)
1,245 (1,549 ) Loss before provision for
income taxes (1,030 ) (8,665 ) Provision for income taxes
1,065 1,810 Net loss $ (2,095 ) $
(10,475 ) Net loss per share: Basic and diluted loss per share $
(0.03 ) $ (0.13 ) Shares used in computing per share amounts: Basic
and diluted shares 80,126 80,009
STREAM GLOBAL SERVICES, INC.
Consolidated Condensed Balance
Sheet
(In thousands)
March
31,2011(unaudited)
December 31,2010
Assets: Current assets: Cash and cash equivalents $ 24,814 $ 18,489
Accounts receivable, net 168,578 180,211 Other current assets
41,134 37,190 Total current
assets 234,526 235,890 Equipment and fixtures, net 77,670 80,859
Goodwill, intangible assets, and other long-term assets
326, 324 331,236 Total assets $
638,520 $ 647,985 Liabilities and Stockholders’
Equity: Current liabilities $ 122,923 $ 118,608 Revolving Line of
Credit 10,000 24,506 Long-term debt 193,052 192,693 Long-term
capital lease obligations 9,209 10,491 Deferred income taxes 21,837
21,838 Other long-term liabilities
19,130
20,131 Total liabilities 376,151 388,267
Stockholders' equity
262,369
259,718 Total liabilities and stockholders’ equity $
638,520 $ 647,985
STREAM GLOBAL SERVICES, INC.
Reconciliation of GAAP to Non-GAAP
Adjusted EBITDA
(Unaudited)
(In thousands)
Three Months EndedMarch 31, 2011
2010 Operating Income as shown on a
GAAP basis $ 7,477 $ (2,612 ) Add (deduct) items to reconcile to
non-GAAP Adjusted EBITDA: Depreciation and amortization 14,585
16,429 Transaction, severance, closure related expenses, net (126 )
2,050 Stock based compensation expense 745
1,329 Adjusted EBITDA $ 22,681 $ 17,196
To conform with industry practice, Stream is presenting realized
gains (losses) on foreign exchange cash flow hedges as a component
of the hedged item, Direct Costs. The prior year results reflect
this reclassification as follows.
Direct Cost
OperatingIncome (Loss)
AdjustedEBITDA
As reported for the three months ended March 31, 2010 $ 112,802 $
(2,868 ) $ 16,994 Adjustment (218 ) 256
202 Reclassified for the three months ended March 31, 2010 $
112,584 $ (2,612 ) $ 17,196
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