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8-K - 8-K - SYKES ENTERPRISES INCd280408d8k.htm

Exhibit 99.1

 

 

 

    News Release    

 

news release

SYKES ENTERPRISES, INCORPORATED REPORTS

THIRD QUARTER 2016 FINANCIAL RESULTS

—Underlying pace of revenue growth in the third quarter remained healthy

—Disciplined expense management drove upside in diluted earnings per share

relative to the business outlook

—Clearlink continued its strong operating momentum from the second quarter

—Revising 2016 business outlook

 

 

SYKES Enterprises, Incorporated

Corporate Headquarters:

400 North Ashley Drive

Tampa, FL USA 33602

1 · 800 · TO · SYKES

http://www.sykes.com

 

EMEA Operations:

599 Calder Road

Edinburgh EH11 4GA

Scotland

+44 (0) 131 458-6500

 

LOGO

  

TAMPA, FL – October 31, 2016 - Sykes Enterprises, Incorporated (“SYKES” or the “Company”) (NASDAQ: SYKE), a global business process outsourcing (BPO) leader in providing comprehensive inbound customer engagement services to Global 2000 companies, announced today its financial results for the third-quarter ended September 30, 2016.

 

Third Quarter 2016 Financial Highlights

 

•      Third quarter 2016 revenues of $385.7 million increased $67.8 million, or 21.3%, from $317.9 million in the comparable quarter last year. Excluding the acquisition of Clearlink, which added $45.5 million in revenues in the quarter as well as the impact of foreign exchange rate movements in the third quarter 2016 versus the year-ago period, constant currency organic revenues (a non-GAAP measure, see Exhibit 12 for reconciliation) for the third quarter of 2016 increased 7.9% comparably, with the increased demand driven broadly by program expansion and wins with new and existing clients across the communications, financial services, transportation and leisure, healthcare, technology and other verticals (“other verticals,” reflects the contribution from the retail vertical, among others)

 

•      Third quarter 2016 operating margin remained unchanged at 7.7% on a comparable basis versus last year. Third quarter 2016 operating margin reflects approximately 70 basis points of favorable adjustment related to contingent consideration associated largely with the acquisition of Qelp. The contingent consideration adjustment is designed to foster speedier strategic alignment between the two companies to jointly market their differentiated value proposition and capture opportunities emerging in the marketplace

 

•      On a non-GAAP basis (see Exhibit 6 for reconciliation), which excludes the contingent consideration adjustment, third quarter 2016 operating margin was 8.5% versus 8.9% in the same period last year with the delta driven partly by costs associated with capacity additions and the corresponding program ramps coupled with operational inefficiencies related to those ramps, which the Company previously highlighted in its August 2016 business outlook

 

•      Third quarter 2016 diluted earnings per share were $0.50 versus $0.48 in the comparable quarter last year, with the increase due to a combination of factors, including higher comparable revenues resulting partially from the acquisition of Clearlink, the contingent consideration adjustment and lower other expenses, all of which were partially offset by costs associated with higher levels of comparable capacity additions and ramps, and a higher tax rate versus the year-ago period


   

On a non-GAAP basis, third quarter 2016 diluted earnings per share were $0.55 versus $0.54 in the same period last year with the increase related largely to the factors stated above (see Exhibit 6 for reconciliation). Third quarter 2016 diluted earnings per share, however, were higher relative to the Company’s August 2016 business outlook range of $0.46 to $0.50, driven by disciplined expense management as well as lower interest and other expenses

 

   

Consolidated capacity utilization rate decreased to 75% in the third quarter of 2016 from 80% in the same period last year due to a significant increase in the comparable seat count related to projected client demand; the third quarter 2016 capacity data also includes roughly 1,400 seats from the Clearlink acquisition

Americas Region

Revenues from the Company’s Americas region, including operations in North America and offshore (Latin America, South Asia and the Asia Pacific region), increased 26.6% to $326.0 million, or 84.5% of total revenues, for the third quarter of 2016 compared to $257.4 million, or 81.0% of total revenues, in the same prior year period. Excluding the acquisition of Clearlink, which added $45.5 million in revenues in the quarter, constant currency organic revenues (a non-GAAP measure, see Exhibit 12 for reconciliation) for the third quarter of 2016 in Americas increased 9.3% comparably, with the increased demand driven broadly by program expansion and wins with new and existing clients across the communications, financial services, transportation and leisure, healthcare, and other verticals (“other verticals,” reflects the contribution from the retail vertical, among others).

Sequentially, revenues generated from the Americas region increased 6.8% to $326.0 from $305.2 million, or 83.8% of total revenues, in the second quarter of 2016. On a constant currency basis (a non-GAAP measure, see Exhibit 12 for reconciliation) for the third quarter of 2016, the Americas revenue increased 6.9% over the second quarter driven partly by certain client programs with a higher component of seasonal demand coupled with overall demand increase from other programs.

The Americas income from operations for the third quarter of 2016 increased 10.1% to $36.9 million, with an operating margin of 11.3% versus 13.0% in the comparable quarter last year. On a non-GAAP basis, the Americas operating margin was 13.0% versus 14.4% in the comparable quarter last year, with the delta mostly driven by costs associated with capacity additions and ramps and previously discussed operational inefficiencies (see Exhibit 7 for reconciliation).

Sequentially, the Americas income from operations for the third quarter of 2016 increased 20.2% to $36.9 million, with an operating margin of 11.3% versus 10.1% in the second quarter of 2016 driven by the factors mentioned above. On a non-GAAP basis, the Americas operating margin was 13.0% versus 11.9% in the second quarter of 2016, with the delta driven by higher sequential demand (see Exhibit 7 for reconciliation).

EMEA Region

Revenues from the Company’s Europe, Middle East and Africa (EMEA) region decreased 1.3% to $59.7 million, representing 15.5% of total revenues, for the third quarter of 2016, compared to $60.5 million, or 19.0% of total revenues, in the same prior year period. On a constant currency basis (a non-GAAP measure, see Exhibit 12 for reconciliation), EMEA revenues increased 1.9% on a comparable basis driven by new client wins and existing program growth within the technology, financial services and transportation and leisure verticals.

Sequentially, revenues from the Company’s EMEA region increased 0.9% to $59.7 million, or

 

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15.5% of SYKES’ total revenues, versus $59.2 million, or 16.2% of SYKES’ total revenues, in the second quarter of 2016. On a constant currency basis (a non-GAAP measure, see Exhibit 12 for reconciliation), EMEA revenues increased 4.2% sequentially, driven largely by a greater number of working days.

The EMEA region’s income from operations for the third quarter of 2016 was $7.4 million, or 12.4% of EMEA revenues, versus $4.6 million, or 7.7% of revenues, in the comparable quarter last year. The EMEA’s income from operations in the third quarter of 2016 includes $2.6 million, or approximately 440 basis points, of contingent consideration adjustment related to the acquisition of Qelp. On a non-GAAP basis, the operating margin increased slightly to 8.6% from 8.2% in the year-ago period due to new client wins and existing program growth (see Exhibit 7 for reconciliation).

Sequentially, the EMEA region’s income from operations for the third quarter of 2016 was $7.4 million, or 12.4% of EMEA revenues, versus $2.9 million, or 4.9% of revenues, in the second quarter of 2016. The EMEA’s income from operations in the third quarter of 2016 includes $2.6 million, or approximately 440 basis points, of contingent consideration adjustment related to the acquisition of Qelp. On a non-GAAP basis, the EMEA operating margin was 8.6% versus 5.5% in the second quarter of 2016 due mostly to a greater number of working days (see Exhibit 7 for reconciliation).

Other

Other (loss) from operations, which include corporate and other costs, increased to $14.7 million, or 3.8% of revenues in the third quarter of 2016, compared to $13.7 million, or 4.3% of revenues in the prior year period, with the percentage decrease largely a result of costs leveraged across a larger revenue base resulting from the Clearlink acquisition. On a non-GAAP basis, Other decreased to 3.8% of revenues in the third quarter of 2016 from 4.3% in the year ago period due to the factor stated above (see Exhibit 7 for reconciliation).

Sequentially, Other decreased to $14.7 million, or 3.8% of revenues, from $20.2 million, or 5.5% of revenues, in the second quarter of 2016, with the sequential decrease mostly related to Clearlink-related transaction fees incurred in the second-quarter of 2016. On a non-GAAP basis, Other decreased to 3.8% of revenues in the third quarter of 2016 from 4.7% in the second quarter of 2016 due to lower performance based compensation and professional services expenses (see Exhibit 7 for reconciliation).

Other Income (Expense) and Taxes

Total other income (expense), net for the third quarter of 2016 was ($0.5) million compared to ($1.2) million for the same period in the prior year, with the decrease principally due to foreign currency transaction gains in the third quarter of 2016. These gains result primarily from exchange rate fluctuations in U.S. dollar denominated assets and liabilities held by the Company’s foreign subsidiaries. Other income (expense), net for the third quarter for 2016 reflects approximate ($0.2) million in interest accretion associated with the contingent purchase price of Qelp and the contingent purchase price of acquisitions by Clearlink. This accretion is the present value of the contingent consideration with the resulting spread between the present value and the contingent consideration amortized over a three-year life (a non-GAAP measure, see Exhibit 6 for reconciliation).

The Company recorded an effective tax rate of 27.2% for the third quarter of 2016 versus 14.2% in the same period last year and essentially in-line with the estimated 27.0% provided in the Company’s August 2016 business outlook. The rate differential compared to the same period last year was principally a function of an unrecognized tax benefit and the release of a valuation allowance in the year-ago comparable period.

 

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On a non-GAAP basis, the third quarter 2016 effective tax rate was 29.2% compared to 17.2% in the same period last year and essentially in-line with the estimated 29.0% provided in the Company’s August 2016 business outlook (see Exhibit 11 for reconciliation) was due to the above-mentioned factors.

Liquidity and Capital Resources

The Company’s balance sheet at September 30, 2016 remained strong with cash and cash equivalents of $283.3 million, of which approximately 89.6%, or $254.0 million, was held in international operations and is deemed to be indefinitely reinvested offshore. At quarter end, the Company had $272.0 million in borrowings outstanding, with $168.0 million available under its $440.0 million credit facility.

Business Outlook

—The overall demand trajectory across most of the Company’s vertical markets mix still remains healthy. This demand is being driven by growth with both new and existing clients across the Americas and EMEA regions. The Company, however, is revising its business outlook to reflect the on-going impact of operational factors discussed in its August 1, 2016 financial press release. These factors are attributable to a handful of clients and stem from the speedy pace of sizeable ramps, the over-delivery of volume amid those ramps and client-driven program changes, all of which are leading to workforce challenges, including staffing inefficiencies. The Company has put into effect various action plans – ranging from increasing agent support ratios to performance-based wage adjustments where practicable – and expects to have these client programs operating at more normalized levels by the second half of 2017. The Company, in the meantime, expects these operational factors to impact its full-year 2016 revenue range by an average of approximately $11 million resulting in a slight reduction in diluted earnings per share relative to its business outlook provided in August 2016. Despite the revision in the revenue range, the Company is still projected to deliver solid revenue growth for 2016 over 2015;

—The Company added roughly 1,800 seats on a gross basis in the third quarter, with the year-to-date seats additions as of September 30, 2016 totaling 6,300. The total gross seats planned for the full year are expected to be around 6,900 seats. The Company plans to add another 600 in gross seats in the fourth quarter. The Company, however, plans to rationalize around 1,800 seats in 2016, of which roughly 1,400 have already been rationalized as of September 30, 2016. The Company anticipates a net seat count increase of approximately 5,100 in 2016 versus 2015 (All of the preceding seat addition-reduction discussion excludes 1,400 in seat contribution from Clearlink.);

—The Company’s revenues and earnings per share assumptions for the fourth quarter and full year 2016 are based on foreign exchange rates as of October 2016. Therefore, the continued volatility in foreign exchange rates between the U.S. dollar and the functional currencies of the markets the Company serves could have a further impact, positive or negative, on revenues and both GAAP and non-GAAP earnings per share relative to the business outlook for the fourth quarter and full-year as discussed above; and

—The Company anticipates total other interest income (expense), net of approximately ($1.5) million for the fourth quarter and ($2.4) million for the full year 2016. The full year 2016 amount includes the accretion of the contingent consideration of approximately $0.8 million. The amounts in the other interest income (expense), however, exclude the potential impact of any future foreign exchange gains or losses.

 

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The assumptions driving the business outlook for the fourth quarter and full-year 2016 are as follows:

Considering the above factors, the Company anticipates the following financial results for the three months ending December 30, 2016:

 

 

Revenues in the range of $389.0 million to $394.0 million

 

Effective tax rate of approximately 27.0%; **on a non-GAAP basis, an effective tax rate of approximately 29.0%

 

Fully diluted share count of approximately 42.2 million

 

Diluted earnings per share of approximately $0.39 to $0.42

 

**Non-GAAP diluted earnings per share in the range of $0.48 to $0.51

 

Capital expenditures in the range of $16.0 million to $21.0 million

For the twelve months ending December 31, 2016, the Company anticipates the following financial results:

 

 

Revenues in the range of $1,460.0 million to $1,465.0 million

 

Effective tax rate of approximately 28.0%; **on a non-GAAP basis, an effective tax rate of approximately 30.0%

 

Fully diluted share count of approximately 42.3 million

 

Diluted earnings per share of approximately $1.45 to $1.48

 

**Non-GAAP diluted earnings per share in the range of $1.79 to $1.82

 

Capital expenditures in the range of $75.0 million to $80.0 million    

**See exhibits 10 & 11 for fourth quarter and full-year 2016 non-GAAP diluted earnings per share and tax rate reconciliations.

Conference Call

The Company will conduct a conference call regarding the content of this release tomorrow, November 1, 2016, at 10:00 a.m. Eastern Daylight 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/investor-relations/Investor-Resources/Investor-Relations-Home/default.aspx.

Non-GAAP Financial Measures

Constant currency organic revenue growth, non-GAAP income from operations, non-GAAP operating margins, non-GAAP tax rate, non-GAAP net income, non-GAAP net income per diluted share and non-GAAP income from operations by segment are important indicators of performance as these non-GAAP financial measures assist readers in further understanding the Company’s results on a comparable basis from its underlying operations without the distortive effects of income and expenses that are not intrinsic to how management evaluates and rewards such performance. Items such as, but not limited to, a gain on the sale of a facility, foreign exchange swings and acquisition related fees, are excluded from non-GAAP financial measures as they are not related to the Company’s underlying operating performance. These non-GAAP indicators of performance are not measures of financial performance under U.S. Generally Accepted Accounting Principles (“GAAP”) and should not be considered a substitute for measures determined in accordance with GAAP. Refer to the exhibits in the release for detailed reconciliations.

 

5


About Sykes Enterprises, Incorporated

SYKES is a global business process outsourcing (BPO) leader in providing comprehensive inbound customer engagement services to Global 2000 companies, primarily in the communications, financial services, healthcare, technology, transportation and retail industries. SYKES’ differentiated end-to-end service platform effectively engages consumers at every touch point in their customer lifecycle, starting from digital marketing and acquisition to customer support, technical support, up-sell/cross-sell and retention. Headquartered in Tampa, Florida, with customer contact engagement centers throughout the world, SYKES provides its services through multiple communication channels encompassing phone, e-mail, web, chat, social media and digital self-service. Utilizing its integrated onshore/offshore and virtual at-home agent delivery models, SYKES serves its clients through two geographic operating segments: the Americas (United States, Canada, Latin America, India 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 order 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,” “implies,” 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 impact of economic recessions in the U.S. and other parts of the world, (ii) fluctuations in global business conditions and the global economy, ability of maintaining margins offshore (iii) SYKES’ ability to continue the growth of its support service revenues through additional technical and customer contact centers, (iv) currency fluctuations, (v) the timing of significant orders for SYKES’ products and services, (vi) loss or addition of significant clients, (vii) the early termination of contracts by clients, (viii) SYKES’ ability to recognize deferred revenue through delivery of products or satisfactory performance of services, (ix) construction delays of new or expansion of existing customer support centers, (x) difficulties or delays in implementing SYKES’ bundled service offerings, (xi) failure to achieve sales, marketing and other objectives, (xii) variations in the terms and the elements of services offered under SYKES’ standardized contract including those for future bundled service offerings, (xiii) changes in applicable accounting principles or interpretations of such principles, (xiv) delays in the Company’s ability to develop new products and services and market acceptance of new products and services, (xv) rapid technological change, (xvi) political and country-specific risks inherent in conducting business abroad, (xvii) SYKES’ ability to attract and retain key management personnel, (xviii) SYKES’ ability to further penetrate into vertically integrated markets, (xix) SYKES’ ability to expand its global presence through strategic alliances and selective acquisitions, (xx) SYKES’ ability to continue to establish a competitive advantage through sophisticated technological capabilities, (xxi) the ultimate outcome of any lawsuits or penalties (regulatory or otherwise), (xxii) SYKES’ dependence on trends toward outsourcing, (xxiii) 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, (xxiv) the existence of substantial competition, (xxv) the ability to obtain and maintain grants and other incentives, including tax holidays or otherwise, (xxvi) risks related to the integration of the businesses of SYKES, Qelp and Clearlink and (xxvii) 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.

 

6


For additional information contact:

Subhaash Kumar

Sykes Enterprises, Incorporated

(813) 233-7143

 

7


Sykes Enterprises, Incorporated

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

Exhibit 1

 

                                                                          
     Three Months Ended  
     September 30,
2016
    September 30,
2015
    June 30,
2016
 

Revenues

   $ 385,743      $ 317,924      $ 364,402   

Direct salaries and related costs

     (249,859     (206,139     (239,442

General and administrative

     (87,955     (72,702     (94,335

Depreciation, net

     (13,004     (10,938     (11,960

Amortization of intangibles

     (5,254     (3,638     (5,263
  

 

 

   

 

 

   

 

 

 

Income from operations

     29,671        24,507        13,402   

Total other income (expense), net

     (462     (1,187     (373
  

 

 

   

 

 

   

 

 

 

Income before income taxes

     29,209        23,320        13,029   

Income taxes

     (7,939     (3,310     (3,891
  

 

 

   

 

 

   

 

 

 

Net income

   $ 21,270        20,010      $ 9,138   
  

 

 

   

 

 

   

 

 

 

Net income per common share:

      

Basic

   $ 0.51      $ 0.48      $ 0.22   
  

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.50      $ 0.48      $ 0.22   
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

      

Basic

     41,938        41,783        41,970   

Diluted

     42,224        42,084        42,101   

 

8


Sykes Enterprises, Incorporated

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

Exhibit 2

 

     Nine Months Ended  
     September 30,
2016
    September 30,
2015
 

Revenues

   $ 1,070,891      $ 949,062   

Direct salaries and related costs

     (694,856     (622,209

General and administrative

     (262,800     (218,080

Depreciation, net

     (35,748     (33,004

Amortization of intangibles

     (14,144     (10,504

Income from operations

     63,343        65,265   

Total other income (expense), net

     (937     (2,915
  

 

 

   

 

 

 

Income before income taxes

     62,406        62,350   

Income taxes

     (18,044     (13,789
  

 

 

   

 

 

 

Net income

   $ 44,362      $ 48,561   
  

 

 

   

 

 

 

Net income per common share:

    

Basic

   $ 1.06      $ 1.16   
  

 

 

   

 

 

 

Diluted

   $ 1.05      $ 1.15   
  

 

 

   

 

 

 

Weighted average common shares outstanding:

    

Basic

     41,873        41,992   

Diluted

     42,233        42,337   

 

9


Sykes Enterprises, Incorporated

Segment Results

(in thousands, except per share data)

(Unaudited)

Exhibit 3

 

                                                                          
     Three Months Ended  
     September 30,
2016
    September 30,
2015
    June 30,
2016
 

Revenues:

      

Americas

   $ 326,013      $ 257,421      $ 305,211   

EMEA

     59,711        60,481        59,152   

Other

     19        22        39   
  

 

 

   

 

 

   

 

 

 

Total

   $ 385,743      $ 317,924      $ 364,402   
  

 

 

   

 

 

   

 

 

 

Operating Income:

      

Americas

   $ 36,946      $ 33,541      $ 30,725   

EMEA

     7,391        4,629        2,896   

Other

     (14,666     (13,663     (20,219
  

 

 

   

 

 

   

 

 

 

Income from operations

     29,671        24,507        13,402   

Total other income (expense), net

     (462     (1,187     (373

Income taxes

     (7,939     (3,310     (3,891
  

 

 

   

 

 

   

 

 

 

Net income

   $ 21,270      $ 20,010      $ 9,138   
  

 

 

   

 

 

   

 

 

 
     Nine Months Ended        
     September 30,
2016
    September 30,
2015
   

Revenues:

      

Americas

   $ 893,300      $ 771,276     

EMEA

     177,488        177,728     

Other

     103        58     
  

 

 

   

 

 

   

Total

   $ 1,070,891      $ 949,062     
  

 

 

   

 

 

   

 

Operating Income:

      

Americas

   $ 100,658      $ 94,751     

EMEA

     13,697        11,386     

Other

     (51,012     (40,872  
  

 

 

   

 

 

   

Income from operations

 

    

 

63,343

 

  

 

   

 

65,265

 

  

 

 

Total other income (expense), net

     (937     (2,915  

Income taxes

 

    

 

(18,044

 

 

   

 

(13,789

 

 

 
  

 

 

   

 

 

   

Net income

   $ 44,362      $ 48,561     
  

 

 

   

 

 

   

 

10


Sykes Enterprises, Incorporated

Consolidated Balance Sheets

(in thousands, except seat data)

(Unaudited)

Exhibit 4

 

                                                                    
     September 30,
2016
    December 31,
2015
       

Assets:

      

Current assets

   $ 630,509      $ 563,037     

Property and equipment, net

     148,974        111,962     

Goodwill & intangibles, net

     425,898        246,629     

Other noncurrent assets

     43,453        26,144     
  

 

 

   

 

 

   

Total assets

   $ 1,248,834      $ 947,772     
  

 

 

   

 

 

   
      

Liabilities & Shareholders’ Equity:

      

Current liabilities

   $ 208,445      $ 153,175     

Noncurrent liabilities

     314,295        115,917     

Shareholders’ equity

     726,094        678,680     
  

 

 

   

 

 

   

Total liabilities and shareholders’ equity

   $ 1,248,834      $ 947,772     
  

 

 

   

 

 

   
Sykes Enterprises, Incorporated   
Supplementary Data   
     Q3 2016     Q3 2015        

Geographic Mix (% of Total Revenues):

      

Americas (1)

     85%        81%     

Europe, Middle East & Africa (EMEA)

     15%        19%     

Other

     0%        0%     
  

 

 

   

 

 

   

Total

     100%        100%     
  

 

 

   

 

 

   
(1) Includes the United States, Canada, Latin America, South Asia and the Asia Pacific (APAC) Region. Latin America, South Asia 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 2016     Q3 2015        

Vertical Industry Mix (% of Total Revenues):

      

Communications

     39%        32%     

Financial Services

     22%        24%     

Technology / Consumer

     17%        20%     

Transportation & Leisure

     7%        8%     

Healthcare

     4%        5%     

Other

     11%        11%     
  

 

 

   

 

 

   

Total

     100%        100%     
  

 

 

   

 

 

   
     Seat Capacity (2)  
     Q3 2016     Q3 2015     Q2 2016  

Americas

     40,900        34,400        39,300   

EMEA

     6,500        6,700        6,400   
  

 

 

   

 

 

   

 

 

 

Total

     47,400        41,100        45,700   
  

 

 

   

 

 

   

 

 

 
     Capacity Utilization  
     Q3 2016     Q3 2015     Q2 2016  

Americas

     75     78     77

EMEA

     78     85     79
  

 

 

   

 

 

   

 

 

 

Total

     75     80     78
  

 

 

   

 

 

   

 

 

 

(2) The seat capacity and capacity utilization data are related to the Company’s brick-and-mortar call centers. At the end of the third quarter 2016, the Company had approximately 3,300 agent FTEs working virtually from home. There are no seats associated with Qelp.

    

 

11


Sykes Enterprises, Incorporated

Cash Flow from Operations

(in thousands)

(Unaudited)

Exhibit 5

 

     Three Months Ended  
     September 30,
2016
    September 30,
2015
 

Cash Flow From Operating Activities:

    

Net income

   $ 21,270      $ 20,010   

Depreciation

     13,149        11,135   

Amortization of intangibles

     5,254        3,638   

Amortization of deferred grants

     (215     (259

Changes in assets and liabilities and other

     (772     3,285   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 38,686      $ 37,809   
  

 

 

   

 

 

 

Capital expenditures

   $ 24,939      $ 16,840   

Cash paid during period for interest

   $ 1,183      $ 362   

Cash paid during period for income taxes

   $ 2,821      $ 6,529   
     Nine Months Ended  
     September 30,
2016
    September 30,
2015
 

Cash Flow From Operating Activities:

    

Net income

   $ 44,362      $ 48,561   

Depreciation

     36,208        33,593   

Amortization of intangibles

     14,144        10,504   

Amortization of deferred grants

     (659     (700

Changes in assets and liabilities and other

     9,249        2,955   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 103,304      $ 94,913   
  

 

 

   

 

 

 

Capital expenditures

   $ 59,348      $ 36,316   

Cash paid during period for interest

   $ 2,680      $ 1,097   

Cash paid during period for income taxes

   $ 14,050      $ 20,760   

 

12


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(in thousands, except per share data)

(Unaudited)

Exhibit 6

 

                                                                          
     Three Months Ended  
     September 30,
2016
    September 30,
2015
     June 30,
2016
 

GAAP income from operations

   $ 29,671      $ 24,507       $ 13,402   

Adjustments:

       

Acquisition-related severance

     162        -         -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     5,862        3,898         5,966   

Merger & integration costs

     39        -         2,963   

Gain on contingent consideration

     (2,798     -         -   

Other

     -        -         -   
  

 

 

   

 

 

    

 

 

 

Non-GAAP income from operations

   $ 32,936      $ 28,405       $ 22,331   
  

 

 

   

 

 

    

 

 

 
     Three Months Ended  
     September 30,
2016
    September 30,
2015
     June 30,
2016
 

GAAP net income

   $ 21,270      $ 20,010       $ 9,138   

Adjustments, net of taxes:

       

Acquisition-related severance

     100        -         -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     3,699        2,533         3,767   

Merger & integration costs

     2        -         1,838   

Gain on contingent consideration

     (2,070     -         -   

Other

     147        -         213   
  

 

 

   

 

 

    

 

 

 

Non-GAAP net income

   $ 23,148      $ 22,543       $ 14,956   
  

 

 

   

 

 

    

 

 

 
     Three Months Ended  
     September 30,
2016
    September 30,
2015
     June 30,
2016
 

GAAP net income, per diluted share

   $ 0.50      $ 0.48       $ 0.22   

Adjustments:

       

Acquisition-related severance

     -        -         -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     0.09        0.06         0.09   

Merger & integration costs

     -        -         0.04   

Gain on contingent consideration

     (0.04     -         -   

Other

     -        -         0.01   
  

 

 

   

 

 

    

 

 

 

Non-GAAP net income, per diluted share

   $ 0.55      $ 0.54       $ 0.36   
  

 

 

   

 

 

    

 

 

 

 

13


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information By Segment

(in thousands)

(Unaudited)

Exhibit 7

 

    Americas     EMEA     Other (1)  
    Three Months Ended     Three Months Ended     Three Months Ended  
    September 30,
2016
    September 30,
2015
    September 30,
2016
    September 30,
2015
    September 30,
2016
    September 30,
2015
 

GAAP income (loss) from operations

  $ 36,946      $ 33,541      $ 7,391      $ 4,629      $ (14,666   $ (13,663

Adjustments:

           

Acquisition-related severance

    162        -        -        -        -        -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

    5,509        3,573        353        325        -        -   

Merger & integration costs

    -        -        -        -        39        -   

Gain on contingent consideration

    (208     -        (2,590     -        -        -   

Other

    -        -        -        -        -        -   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP income (loss) from operations

  $ 42,409      $ 37,114      $ 5,154      $ 4,954      $ (14,627   $ (13,663
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Americas     EMEA     Other (1)  
    Three Months Ended     Three Months Ended     Three Months Ended  
    September 30,
2016
    June 30,
2016
    September 30,
2016
    June 30,
2016
    September 30,
2016
    June 30,
2016
 

GAAP income (loss) from operations

  $ 36,946      $ 30,725      $ 7,391      $ 2,896      $ (14,666   $ (20,219

Adjustments:

           

Acquisition-related severance

    162        -        -        -        -        -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

    5,509        5,610        353        356        -        -   

Merger & integration costs

    -        29        -        -        39        2,934   

Gain on contingent consideration

    (208     -        (2,590     -        -        -   

Other

    -        -        -        -        -        -   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP income (loss) from operations

  $ 42,409      $ 36,364      $ 5,154      $ 3,252      $ (14,627   $ (17,285
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1) Other includes corporate and other costs.

 

14


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(in thousands, except per share data)

(Unaudited)

Exhibit 8

 

     Nine Months Ended  
     September 30,
2016
    September 30,
2015
 

GAAP income from operations

   $ 63,343      $ 65,265   

Adjustments:

    

Acquisition-related severance

     162        -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     15,454        11,380   

Merger & integration costs

     4,444        -   

Gain on contingent consideration

     (2,798     -   

Other

     -        -   
  

 

 

   

 

 

 

Non-GAAP income from operations

   $ 80,605      $ 76,645   
  

 

 

   

 

 

 
     Nine Months Ended  
     September 30,
2016
    September 30,
2015
 

GAAP net income

   $ 44,362      $ 48,561   

Adjustments, net of taxes:

    

Acquisition-related severance

     100        -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     9,903        7,386   

Merger & integration costs

     2,734        -   

Gain on contingent consideration

     (2,070     -   

Other

     520        -   
  

 

 

   

 

 

 

Non-GAAP net income

   $ 55,549      $ 55,947   
  

 

 

   

 

 

 
     Nine Months Ended  
     September 30,
2016
    September 30,
2015
 

GAAP net income, per diluted share

   $ 1.05      $ 1.15   

Adjustments:

    

Acquisition-related severance

     -        -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     0.23        0.17   

Merger & integration costs

     0.06        -   

Gain on contingent consideration

     (0.05     -   

Other

     0.01        -   
  

 

 

   

 

 

 

Non-GAAP net income, per diluted share

   $ 1.30      $ 1.32   
  

 

 

   

 

 

 

 

15


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information By Segment

(in thousands)

(Unaudited)

Exhibit 9

 

    Americas     EMEA     Other (1)  
    Nine Months Ended     Nine Months Ended     Nine Months Ended  
    September 30,
2016
    September 30,
2015
    September 30,
2016
    September 30,
2015
    September 30,
2016
    September 30,
2015
 

GAAP income (loss) from operations

  $ 100,658      $ 94,751      $ 13,697      $ 11,386      $ (51,012   $ (40,872

Adjustments:

           

Acquisition-related severance

    162        -        -        -        -        -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

    14,399        11,055        1,055        325        -        -   

Merger & integration costs

    29        -        -        -        4,415        -   

Gain on contingent consideration

    (208     -        (2,590     -        -        -   

Other

    -        -        -        -        -        -   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP income (loss) from operations

  $ 115,040      $ 105,806      $ 12,162      $ 11,711      $ (46,597   $ (40,872
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1) Other includes corporate and other costs.

 

16


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(Unaudited)

Exhibit 10

 

     Business Outlook
Fourth Quarter
2016
 

GAAP net income, per diluted share

     $0.39 - $0.42   

Adjustments:

  

Acquisition-related severance

     -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     0.09   

Merger & integration costs

     -   

Gain on contingent consideration

     -   

Other

     -   
  

 

 

 

Non-GAAP net income, per diluted share

     $0.48 - $0.51   
  

 

 

 
     Business Outlook
Full Year

2016
 

GAAP net income, per diluted share

     $1.45 - $1.48   

Adjustments:

  

Acquisition-related severance

     -   

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

     0.32   

Merger & integration costs

     0.06   

Gain on contingent consideration

     (0.05

Other

     0.01   
  

 

 

 

Non-GAAP net income, per diluted share

     $1.79 - $1.82   
  

 

 

 

 

17


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(Unaudited)

Exhibit 11

 

     Three Months Ended
     September 30,
2016
   September 30,
2015

GAAP tax rate

   27%    14%

Adjustments:

     

Acquisition-related severance

   -    -

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

   2%    3%

Merger & integration costs

   -    -

Gain on contingent consideration

   -    -

Other

   -    -
  

 

  

 

Non-GAAP tax rate

   29%    17%
  

 

  

 

     Three Months
Ended
   Year Ended
     December 31,
2016
   December 31,
2016

GAAP tax rate

   27%    28%

Adjustments:

     

Acquisition-related severance

   -    -

Acquisition-related depreciation & amortization of property & equipment and intangible write-ups

   2%    2%

Merger & integration costs

   -    -

Gain on contingent consideration

   -    -

Other

   -    -
  

 

  

 

Non-GAAP tax rate

   29%    30%
  

 

  

 

 

18


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information By Segment

(in thousands)

(Unaudited)

Exhibit 12

 

                                                                                                       
     Three Months Ended
September 30, 2016 vs. September 30, 2015 (3)
     Americas    EMEA    Other (4)    Consolidated

GAAP revenue growth

   26.6%    -1.3%    -13.6%    21.3%

Adjustments:

           

Clearlink acquisition (1)

   -17.7%    0.0%    0.0%    -14.3%

Foreign currency impact (2)

   0.3%    3.2%    0.0%    0.9%
  

 

  

 

  

 

  

 

Non-GAAP constant currency organic revenue growth

   9.3%    1.9%    -13.6%    7.9%
     Three Months Ended
September 30, 2016 vs. June 30, 2016 (3)
    
     Americas    EMEA    Other (4)   

GAAP revenue growth

   6.8%    0.9%    -51.3%   

Adjustments:

           

Clearlink acquisition (1)

   0.0%    0.0%    0.0%   

Foreign currency impact (2)

   0.1%    3.2%    0.0%   
  

 

  

 

  

 

  

Non-GAAP constant currency organic revenue growth

   6.9%    4.2%    -51.3%   

(1) The Company acquired Clearlink on April 1, 2016.

(2) Foreign exchange fluctuations are calculated on a constant currency basis by translating the current period reported amounts using the prior period foreign exchange rate for each underlying currency.

(3) Represents the period-over-period growth rate.

(4) Other includes corporate and other costs.

 

19