OOO Stream Global Svcs

Revenues of $126 million and Gross Profit of 42% BOSTON, Aug. 4 /PRNewswire-FirstCall/ -- Stream Global Services, Inc., (AMEX:OOO), premium provider of customer care and business process outsourcing (BPO) services for Fortune 1000 companies, ("Stream"), today reported consolidated financial results for its 2009 second quarter. GAAP Consolidated Results On July 31, 2008, Stream (formerly known as Global BPO Services Corp.), a development stage company, completed its acquisition of Stream Holdings Corporation ("SHC").(1) On a GAAP basis, revenue for the three and six months ended June 30, 2009 was $125.7 million and $261.3 million, as compared to zero in the three and six months ended June 30, 2008. GAAP net loss was $2.6 million and $0.9 million for the three and six months ended June 30, 2009, as compared GAAP net income of $0.7 million and $1.9 million for the three and six months ended June 30, 2008. Pro Forma Combined Consolidated Results On a pro forma combined consolidated basis, the Company posted revenue for the three and six months ended June 30, 2009 of $125.7 million and $261.3 million, as compared to $128.7 million and $269.1 million in the three and six months ended June 30, 2008. Revenue for the three and six months ended June 30, 2008 included approximately $8 million and $23 million, respectively from customers that were lost prior to the acquisition of SHC. Stream's gross profit as a percentage of revenue increased to 42% in the three and six months ended June 30, 2009, compared to 35% in the three and six months ended June 30, 2008. For the three and six months ended June 30, 2009, adjusted pro forma earnings before interest taxes depreciation and amortization ("EBITDA") increased 74% and 101% to $10.5 million and $26.4 million compared to $6.0 million and $13.1 million in the year-earlier period. Adjusted EBITDA as a percentage of revenue for the three and six months ended June 30, 2009 was 8.4% and 10.1%, compared to 4.7% and 4.9% for the three and six months ended June 30, 2008. 2009 Accomplishments "Since acquiring Stream in July of 2008, we have achieved many significant milestones," commented Scott Murray, Chairman and Chief Executive Officer of Stream. "We built an industry-leading management team, expert in delivering value-driven services for our clients. We expanded our global presence to regions such as El Salvador, Tunis, Egypt and the Philippines. And, we have been successful in attracting a number of new clients, most of which came on board during the second quarter of the year. As a result, we experienced start-up costs associated with this new business, relative to initiatives such as training, to ensure the quality necessary for the successful launch of new client services. In addition, we experienced start-up costs for the new solution centers opened in the second quarter - Philippines and Tunis - all of which were expensed in our income statement." Murray concluded, "During the remainder of 2009, we expect to continue to expand our presence in the Philippines, Latin America and Asia in order to provide a global one-stop service platform that allows Stream to provide premier services to help our clients achieve their goals." For further information please contact: Karen Falcone, Vice President of Marketing at 781-304-1800 or . 1. On July 31, 2008, Stream Global Services, Inc. ("SGSI") (formerly known as Global BPO Services Corp.) completed its acquisition of Stream Holdings Corporation ("SHC"). These financial results also include non-GAAP pro forma combined results of operations for SGSI and SHC as if they had been combined since January 1, 2008. The pro forma combined consolidated condensed statements of operations are presented because management believes they reflect Stream's ongoing business in a manner that allows meaningful period-to-period comparisons. Prior to July 31, 2008, SGSI was a blank check company formed for the purpose of seeking to acquire an operating company. Accordingly, we had no revenues prior to July 31, 2008 because we were in the development stage. About Stream Global Services, Inc. Stream Global Services is a premium provider of customer care and business process outsourcing (BPO) services for the brand-driven Fortune 1000. A global firm, with approximately 16,000 employees based out of 35 service centers in 20 countries, Stream is a trusted advisor to some of the largest technology, retail, entertainment/media, telecommunications and related companies in the world. Its service programs, including technical support, customer retention and revenue generation, are delivered through a set of standardized best practices by a highly skilled workforce. Stream continues to expand its global presence and service offerings to increase brand loyalty, revenue and business performance for organizations across the globe. 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, 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 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 our Form 10-Q for the three months ended March 31, 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 Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenue $125,670 $- $261,284 $- Direct cost of revenue 73,405 - 152,019 - ------ --- ------- --- Gross profit 52,265 - 109,265 - ------ --- ------- --- Operating expenses: Selling, general and administrative expenses 42,217 282 85,718 545 Depreciation expense 4,579 5 8,765 9 Amortization expense 2,333 - 4,812 - ----- --- ------ --- Income (loss) from operations 3,136 (287) 9,970 (554) Interest expense (income) and other financial costs 3,459 (1,347) 5,509 (3,486) ----- ------ ----- ------ Income (loss) before provision for income taxes (323) 1,060 4,461 2,932 Provision for income taxes 2,242 400 5,328 1,070 ----- --- ----- ----- Net income (loss) $(2,565) $660 $(867) $1,862 Preferred stock beneficial conversion feature, accretion and dividends 2,161 258 3,679 288 ----- --- ----- --- Net income (loss) available to common shareholders: (4,726) 402 (4,546) 1,574 ====== === ====== ===== Basic and Diluted income (loss) per share $(0.50) $0.01 $(0.48) $0.05 ====== ===== ====== ===== Shares used in computing per share data: Basic and Diluted shares 9,449 29,688 9,452 29,688 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) June 30, December 31, 2009 2008 ---- ---- Assets Current assets: Cash and cash equivalents $14,189 $10,660 Accounts receivable, net 106,141 109,385 Other current assets 26,869 26,811 ------ ------ Total current assets 147,199 146,856 Equipment and fixtures, net 49,577 41,634 Goodwill, intangible assets, and other long-term assets 141,032 141,455 ------- ------- Total assets $337,808 $329,945 ======== ======== Liabilities and Stockholders' Equity Current liabilities $74,242 $79,392 Long-term debt 72,929 63,624 Capital lease obligations 10,184 5,484 Deferred income taxes 19,237 17,396 Other long-term liabilities 14,643 16,387 ------ ------ Total liabilities 191,235 182,283 Stockholders' equity and preferred stock * 146,573 147,662 ------- ------- Total liabilities and stockholders' equity $337,808 $329,945 ======== ======== * June 30, 2009 and December 31, 2008 includes $712 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 Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2009 2008 2009 2008 ---- ---- ---- ---- (Non-GAAP Pro forma) Revenue $125,670 $128,714 $261,284 $269,086 Direct costs of revenue 73,346 83,270 150,777 174,404 ------ ------ ------- ------- Gross profit 52,324 45,444 110,507 94,682 ------ ------ ------- ------ Gross profit as a percentage of revenue 42% 35% 42% 35% Operating expenses: Selling, general and administrative expenses 42,073 39,403 84,887 81,539 Stock-based compensation expense 120 145 324 290 Depreciation expense 4,579 4,309 8,765 8,404 Amortization expense 2,333 1,438 4,812 2,877 ----- ----- ----- ----- 49,105 45,295 98,788 93,110 ------ ------ ------ ------ Income (loss) from operations 3,219 149 11,719 1,572 Interest expense (income) and other financial costs 3,542 4,198 7,258 5,417 ----- ----- ----- ----- Income (loss) before provision for income taxes (323) (4,049) 4,461 (3,845) Provision for income taxes 2,242 2,806 5,328 5,738 ----- ----- ----- ----- Net income (loss) $(2,565) $(6,855) $(867) $(9,583) ====== ====== ==== ====== Adjusted EBITDA Income (loss) from operations $3,219 $149 $11,719 $1,572 Depreciation and amortization expense 6,912 5,747 13,577 11,281 Restructuring severance expense 248 - 735 - Stock-based compensation expense 120 145 324 290 ------- ------ ------- ------- Adjusted EBITDA $10,499 $6,041 $26,355 $13,143 ======= ====== ======= ======= STREAM GLOBAL SERVICES, INC. RECONCILIATION OF GAAP TO NON-GAAP PRO FORMA INFORMATION (unaudited) (in thousands) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net Income (loss) $(2,565) $660 $(867) $1,862 Add (deduct) items to reconcile to non-GAAP adjusted EBITDA: Provision for income taxes 2,242 400 5,328 1,070 Pro forma depreciation and amortization 6,912 5,747 13,577 11,281 Interest expense (income) and financial costs 3,459 (1,347) 5,509 (3,486) Realized foreign exchange gains 83 446 1,749 132 Restructuring severance 248 - 735 - Stock-based compensation expenses 120 145 324 290 Operating income (loss) from SHC for the period prior to the acquisition of July 31, 2008, excluding depreciation and amortization - (10) - 1,994 --- --- --- ----- Pro Forma EBITDA $10,499 $6,041 $26,355 $13,143 ======= ====== ======= ======= Direct cost of revenue $73,405 $83,587 $152,019 $174,498 Add (deduct) items to reconcile to non-GAAP adjusted EBITDA: Foreign exchange gains (59) (317) (1,242) (94) --- ---- ------ --- Adjusted direct cost of revenue $73,346 $83,270 $150,777 $174,404 ======= ======= ======== ======== Gross profit $52,265 $45,127 $109,265 $94,588 Add (deduct) items to reconcile to non-GAAP adjusted EBITDA: Foreign exchange gains 59 317 1,242 94 --- --- ----- --- Adjusted gross profit $52,324 $45,444 $110,507 $94,682 ======= ======= ======== ======= Selling, general and administrative expenses $42,217 $39,677 $85,718 $81,867 Add (deduct) items to reconcile to non-GAAP adjusted EBITDA: Stock-based compensation (120) (145) (324) (290) Foreign exchange gains (24) (129) (507) (38) --- ---- ---- --- Selling, general and administrative expenses $42,073 $39,403 $84,887 $81,539 ======= ======= ======= ======= Income (loss) from operations $3,136 $(297) $9,970 $1,440 Add (deduct) items to reconcile to non-GAAP adjusted EBITDA: Foreign exchange gains 83 446 1,749 132 --- --- ----- --- Income (loss) from operations $3,219 $149 $11,719 $1,572 ====== ==== ======= ====== Interest expense (income) and other financial costs $3,459 $3,752 $5,509 $5,285 Add (deduct) items to reconcile to non-GAAP adjusted EBITDA: Foreign exchange gains 83 446 1,749 132 --- --- ----- --- Interest expense (income) and other financial costs $3,542 $4,198 $7,258 $5,417 ====== ====== ====== ====== STREAM GLOBAL SERVICES, INC. STATEMENT OF OUTSTANDING COMMON STOCK EQUIVALENTS AND WARRANTS AS OF JUNE 30, 2009 (unaudited) (in thousands) Shares or warrants outstanding Percentage ------------------ ---------- Common share equivalents outstanding: Common shares held by founding stockholders subject to resale restrictions 7,813 22.08% Common shares held by employees subject to resale restriction 69 0.19% Common shares held by institutional investor 1,250 3.53% Common shares held by other public investors 314 0.89% ----- ----- Common shares outstanding 9,446 26.69% Common share equivalents from conversion of 151 preferred shares held by Ares at $6.00 per share conversion price 25,945 73.31% ------ ----- Total common share equivalents outstanding 35,391 100.00% ====== ====== Warrants and employee stock options outstanding: Publicly held warrants outstanding, exercisable at $6.00 per warrant into common shares expiring in 2011 20,522 Ares held warrants outstanding, exercisable at $6.00 per warrant into common shares expiring in 2018 7,500 Employee stock options, exercisable at $6.00 per share and not yet vested 3,133 DATASOURCE: Stream Global Services, Inc. CONTACT: Karen Falcone, Vice President of Marketing of Stream Global Services, Inc., +1-781-304-1800, Web Site: http://www.stream.com/

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