Stream Global Services, Inc., (NYSE AMEX: SGS), a leading global
business process outsource (BPO) service provider specializing in
customer relationship management including technical support and
sales programs for Fortune 1000 companies, today announced
consolidated financial results for the three months ended
March 31, 2012.
CEO Commentary
Kathryn Marinello, Chairman and Chief Executive Officer of
Stream, said, “We are very pleased to report a 13% year-over-year
increase in Adjusted EBITDA for the first quarter of 2012. Our
strategy of improving our core operating metrics and investing in
our people has resulted in double-digit growth over the same period
in 2011. We remain committed to our strategy to significantly
invest in our business – our people and our infrastructure – while
delivering returns for our investors.”
First Quarter 2012 Financial Highlights
• Revenue for the quarter ended March 31, 2012 was $216
million, an increase of $3 million, or 1%, from the same period in
2011. The increase is principally due to volume and program
expansion with existing customers as well as ramping of new
customers added in 2011. The company has successfully grown revenue
while eliminating programs that did not meet internal targets for
profitability. Additionally, the change in foreign exchange rates
from the first quarter of 2011 to the first quarter of 2012 lowered
revenue by approximately $2 million.
• Gross profit increased approximately $1 million, or 1%, over
the prior year first quarter. The Gross Profit percentage was 42%
for the first quarter of 2012 versus 43% for the first quarter of
2011 primarily due to agent training for North American
business.
• Income From Operations Excluding Severance, Restructuring and
Other Charges, net for the quarter ended March 31, 2012 was
$11 million versus $7 million for the same period in 2011. This
increase reflects higher gross profit earned on the increased
revenue and a relative decline in Selling, General and
Administrative expenses from 32% of revenue for the first quarter
2011 to 31% of revenue for the first quarter of 2012. This
improvement is largely the result of our cost efficiency
improvement programs implemented during 2011.
• Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (“Adjusted EBITDA”) was $26 million for the first
quarter of 2012, an increase of $3 million, or 13%, from the first
quarter of 2011. Changes in currency rates did not have a material
impact on the quarter’s Adjusted EBITDA.
• Net loss was $1 million for the three months ended
March 31, 2012 compared to a net loss of $2 million for the
three months ended March 31, 2011.
• Cash flow from operating activities for the first quarter 2012
was $21 million, a decrease of $6 million from the prior year first
quarter largely due to working capital improvements in 2011 that
were non-recurring. Days Sales Outstanding improved from 71 days at
March 31, 2011 to 68 days at March 31, 2012.
• Free Cash Flow (operating cash flow less additions to
equipment and fixtures and new capital lease financing) for the
first quarter of 2012 was inflows of $14 million and for the
quarter ended March 31, 2011 was inflows of $21 million. The
decrease in free cash flow during the quarter was primarily a
result of the non-recurring effect of working capital improvements
in 2011 and higher performance-based incentive compensation
payments in 2012.
• The company made capital expenditures of approximately $7
million during the three months ended March 31, 2012, composed
of approximately $4 million for site expansion to accommodate
growth and $3 million to invest in the company’s technology
infrastructure.
Americas Region
Revenue generated from our Americas region, which includes the
United States, Canada, the Philippines, India, Costa Rica,
Nicaragua, the Dominican Republic, El Salvador and China, was $159
million for the three months ended March 31, 2012 compared to
$154 million for the same period in 2011.
Gross profit generated by the Americas region was $70 million
for both the three months ended March 31, 2012 and
March 31, 2011. The gross margin percentage was 44.2% for the
three months ended March 31, 2012 and was 45.5% for the same
period in 2011.
EMEA Region
Revenue generated from our EMEA region, which includes Europe,
the Middle East and Africa, for the three months ended
March 31, 2012 was $57 million compared to $58 million for the
same period in 2011.
Gross profit generated by the EMEA region for the three months
ended March 31, 2012 was $21 million, with a gross margin of
37.4% compared to $20 million with a gross margin percentage of
34.5% for the same period in 2011.
Selling, General and Administrative Expense
Selling, general and administrative expenses, which includes
non-agent service center costs, were $66 million or 31% of revenue
during the three months ended March 31, 2012 and $69 million
or 32% of revenue during the same period in 2011. This percentage
decrease is primarily a result of management focus on cost
efficiency, including the impact of reductions in our workforce in
2011.
Liquidity and Capital Resources
At March 31, 2012, cash and cash equivalents was $18
million, down from $25 million at December 31, 2011. The
balance on the revolving line of credit was $25 million at
March 31, 2012 and $45 million at December 31, 2011. At
March 31, 2012, the company had in excess of $70 million of
availability which could be drawn under its revolving line of
credit.
Stream will hold a conference call for investors on
April 24, 2012 at 5:30 PM EDT. Investors can participate by
calling 1-800-230-1096 or 1-612-332-0107 (for callers outside the
US).
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 31,000 employees
capable of supporting over 35 languages across 49 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
concerning expectations regarding future operating performance and
economic and market conditions. The forward looking statements made
are neither promises nor guarantees, and are subject to risk and
uncertainties that could cause our actual results to differ
materially from those anticipated or indicated, including, without
limitation, risks and uncertainties relating to our current
operation in, as well as entry into, new markets; changes in
general economic and business conditions; fluctuations in foreign
currency rates; fluctuations in sales volume, timing and sales
cycles; our ability to retain our employees in light of competition
for agents; our ability to make payments required under our
outstanding indebtedness; delays in obtaining new clients or sales
from existing clients; delays or interruptions of service as a
result of power loss, fire, natural disasters, security breaches,
civil unrest or political upheaval, and other similar events;
litigation; intense competition in the marketplace from
competitors; future acquisitions, joint ventures or other strategic
investments; and our ability to obtain necessary financing in the
future 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, 2011.
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 Ended March 31, 2012
2011 Revenue $ 215,539 $ 212,691 Direct cost of revenue
124,116 121,953 Gross profit
91,423 90,738 Operating expenses: Selling, general and
administrative expenses 66,292 68,802 Severance, restructuring and
other charges, net 2,804 (126 ) Depreciation expense 11,024 10,191
Amortization expense 3,583 4,394
Total operating expenses 83,703 83,261
Income from operations 7,720 7,477 Interest expense
7,569 7,262 Foreign currency transaction loss (gain) (254 )
1,245 Income (loss) before provision for
income taxes 405 (1,030 ) Provision for income taxes 1,060
1,065 Net loss $ (655 ) $ (2,095 )
Net loss per share: Basic and diluted $ (0.01 ) $
(0.03 ) Shares used in computing per share amounts: Basic and
diluted 75,955 80,126
STREAM GLOBAL SERVICES,
INC. Consolidated Condensed Balance Sheets (In
thousands) (Unaudited)
March 31, December 31, 2012 2011
Assets: Current assets: Cash and cash equivalents $ 17,840 $ 24,586
Accounts receivable, net 162,513 165,963 Other current assets
27,190 27,822 Total current assets 207,543
218,371 Equipment and fixtures, net 83,352 87,611 Goodwill,
intangible assets, and other long-term assets 307,292
312,052 Total assets $ 598,187 $ 618,034
Liabilities and Stockholders’ Equity: Current liabilities $ 119,265
$ 121,932 Revolving line of credit 24,771 44,755 Debt, net of
discounts 195,291 195,019 Capital lease obligations 8,149 9,964
Deferred income taxes 18,873 19,103 Other long-term liabilities
13,672 13,817 Total liabilities 380,021
404,590 Stockholders’ equity 218,166 213,444
Total liabilities and stockholders’ equity $ 598,187 $
618,034
STREAM GLOBAL SERVICES, INC.
Consolidated Condensed Statements of Cash Flows (In
thousands) (Unaudited)
Three Months Ended March 31, 2012 2011
Operating Activities: Net loss $ (655 ) $ (2,095 ) Adjustments to
reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 14,607 14,585 Other non-cash
expenses 1,778 1,594 Changes in operating assets and liabilities
4,999 12,729 Net cash provided
by operating activities $ 20,729 $ 26,813
Investing Activities: Additions to equipment and fixtures $
(6,351 ) $ (5,101 ) Net cash used in investing activities $
(6,351 ) $ (5,101 ) Net cash used in financing
activities $ (22,653 ) $ (16,990 ) Effect of exchange rates on cash
and cash equivalents 1,529 1,603
Net increase (decrease) in cash and cash equivalents $ (6,746 ) $
6,325 Cash and cash equivalents, beginning of period $ 24,586
$ 18,489 Cash and cash equivalents, end of
period $ 17,840 $ 24,814 Supplemental
Item: Capital lease financing $ 158 $ 1,052
STREAM
GLOBAL SERVICES, INC.
Reconciliation of GAAP to Non-GAAP
Income from Operations Excluding Severance, restructuring and other
charges, net
(Unaudited) (In thousands)
Three Months Ended March 31, 2012
2011 Operating income as shown on a GAAP basis $
7,720 $ 7,477 Severance, restructuring and other charges, net
2,804 (126 ) Income from operations
excluding severance, restructuring and other charges, net $ 10,524
$ 7,351
Reconciliation of GAAP to Non-GAAP
Adjusted EBITDA
(Unaudited)
(In thousands)
Three Months Ended March 31, 2012
2011 Operating income as shown on a GAAP basis $ 7,720 $
7,477 Add items to reconcile to non-GAAP Adjusted EBITDA:
Depreciation and amortization 14,607 14,585 Transaction, severance,
closure related expenses, net 2,804 (126 ) Stock based compensation
expense 595 745 Adjusted EBITDA
$ 25,726 $ 22,681
Reconciliation of GAAP to Non-GAAP Free
Cash Flow
(Unaudited)
(In thousands)
Three Months Ended March 31, 2012
2011 Cash flows from operations $ 20,729 $ 26,813 Add
(deduct) items to reconcile to non-GAAP Free Cash Flow: Additions
to equipment and fixtures (6,351 ) (5,101 ) Capital lease financing
(158 ) (1,052 ) Free cash flow $ 14,220 $
20,660
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