Sykes Enterprises Incorporated reports first-quarter 2008 financial results

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Sykes Enterprises, Incorporated a global leader in providing outsourced customer contact management solutions and services in the business process outsourcing arena, announced financial results for the first-quarter of 2008, the highlights of which are as follows:

First Quarter First Quarter (In millions, except per share data) 2008 2007 Revenues $203.7 $168.0 Income from Operations $16.3 $13.6 Net Income $15.7 $11.8 EPS $0.38 $0.29 * First quarter 2008 revenue growth was split between new and existing client relationships at 55% and 45%, respectively, and remained broad based, with the top-40 clients, which represented over three-quarters of total revenues, up 28.8% comparably, reflecting continued strong operational performance * First quarter 2008 income from operations increased 20.2% to $16.3 million; the first quarter 2008 operating margin was largely in line at 8.0% vs. 8.1% in the comparable period last year * Effective tax rate was at 15.4% versus the estimated 28% provided in the Company's first quarter 2008 business outlook, a $0.05 per diluted share benefit, due to a favorable tax audit determination and a shift in the geographic mix of earnings to lower tax rate jurisdictions Americas

Revenues generated from the Company's Americas segment, including operations in North America and offshore (Latin America and the Asia Pacific region), increased 20.4% to $137.3 million, or 67.4% of total revenues, for the first quarter of 2008. Revenues for the prior-year period totaled $114.0 million, or 67.8% of total revenues. The year-over-year revenue increase reflects growth in customer care demand and the related ramp-up of new and existing client programs within the technology, financial services, transportation and healthcare verticals. Approximately 61% of the Americas' first quarter 2008 revenues was generated from services provided offshore compared to approximately 59% in the prior year quarter, reflecting continued growth in customer care demand offshore.

The Americas operating income for the first quarter of 2008 was up 9.0% to $21.9 million, with the operating margin at 15.9% versus 17.6% in the comparable quarter last year. The 170 basis points year-over-year Americas operating margin decrease was due to a combination of factors, including wage increases across certain client programs, ramp-up related costs due to new and existing client programs and a cooler-than-expected winter in Canada resulting in higher roadside assistance tow claims, all of which were partially offset by lower telephony and travel costs.

EMEA

Revenues from the Company's Europe, Middle East and Africa (EMEA) segment increased 22.8% to $66.4 million, representing 32.6% of SYKES' total revenues for the first quarter of 2008 compared to $54.0 million, or 32.2%, in the prior year first quarter. The $12.4 million year-over-year increase was split evenly between growth in customer care demand of $6.2 million and a stronger Euro contributing $6.2 million. The growth in customer care demand was driven by existing and new client programs within the technology and communications verticals.

The EMEA operating income for the first quarter of 2008 was up approximately 59.3% to $4.6 million, with the operating margin at 7.0% versus 5.4% in the comparable quarter last year. The year-over-year margin increase was due to a reduction in telephony, material and travel costs, partially offset by higher wages.

Corporate G&A Expenses

Corporate costs totaled $10.2 million, or 5.0% of revenues, in the first quarter of 2008, compared to $9.4 million, or 5.6% of revenues, in the comparable quarter last year. The corporate general and administrative expenses declined 60 basis points due largely to better general and administrative expense leverage.

Other Income and Taxes

Other income for the first quarter of 2008 totaled approximately $2.3 million compared to other income of $0.9 million for the same period in the prior year. The year-over-year increase in other income was primarily related to fluctuations in non-functional currency transactions and additional interest income resulting from higher average levels of cash.

The Company's first quarter effective tax rate was 15.4% versus 18.4% in the same period last year. The first quarter 2008 tax rate was lower than the estimated 28% tax rate provided in the Company's first quarter 2008 business outlook and below the comparable quarter's tax rate due principally to a favorable tax audit determination, coupled with a shift in the geographic mix of earnings to lower tax rate jurisdictions.

Liquidity and Capital Resources

The Company's balance sheet at March 31, 2008 remained strong with cash and cash equivalents of $189.7 million and no outstanding debt. Approximately $171.9 million of the Company's March 31st cash balance was held in international operations and would be subject to additional taxes if repatriated back to the U.S. At March 31, 2008, the Company also had $50 million of capacity available under its credit facility. For the three-months ended March 31, 2008, the Company generated approximately $1.0 million in cash flow from operations versus $4.9 million in comparable period. On a comparable basis, cash flow from operating activities decreased largely due to an increase in receivables from the 21.2% increase in revenues and a slight increase in days sales outstanding (DSO) due in large part to extended payment terms from certain clients in the EMEA region. In the week following the quarter end, the Company collected $8.7 million in receivables.

Business Outlook

The Company's second-quarter and full-year 2008 business outlook reflects the continuation of favorable demand for its value proposition. This demand, as discussed in the first quarter 2008 results, continues to be fueled by new and existing client relationships within the Americas and EMEA regions and across various verticals, including technology, financial services, communications, healthcare and transportation. Enabling the demand within those verticals include business lines such as wireless, retail banking, technology original equipment manufacturer (OEM) and travel portals, among others. To address this demand, the Company added approximately 800 seats in the first quarter of 2008 and plans to add an additional 500 seats in the second quarter, as part of the previously-announced 3,000 to 4,000 planned seat additions in 2008 and into 2009. Separately, given the favorable tax audit determination in the first quarter of 2008 and the on-going shift in the mix of earnings to lower tax rate jurisdictions, the Company now expects a reduction in its effective tax rate for the second-quarter and full-year 2008.

Considering the above factors, the Company anticipates the following financial results for the three months ended June 30, 2008:

Revenues in the range of $205 million to $210 million * Tax rate of approximately 25% * EPS in the range of $0.29 to $0.31 per diluted share * Capital expenditures in the range of $8.0 million to $11.0 million For the twelve months ended December 31, 2008, the Company anticipates the following financial results:

Revenues in the range of $815 million to $830 million * Tax rate in the range of 23% to 25% * EPS in the range of $1.24 to $1.33 per diluted share * Capital expenditures in the range of $30.0 million to $35.0 million Conference Call

The Company will conduct a conference call regarding the content of this release tomorrow, May 6, 2008 at 10:00 a.m. Eastern 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.

About Sykes Enterprises, Incorporated

SYKES is a global leader in providing customer contact management solutions and services in the business process outsourcing (BPO: 20.86, -0.15, -0.71%) arena. SYKES provides an array of sophisticated customer contact management solutions to Fortune 1000 companies around the world, primarily in the communications, financial services, healthcare, technology and transportation and leisure industries. SYKES specializes in providing flexible, high quality customer support outsourcing solutions with an emphasis on inbound technical support and customer service. Headquartered in Tampa, Florida, with customer contact management centers throughout the world, SYKES provides its services through multiple communication channels encompassing phone, e-mail, web and chat. Utilizing its integrated onshore/offshore global delivery model, SYKES serves its clients through two geographic operating segments: the Americas (United States, Canada, Latin America, India and the Asia Pacific Rim) and EMEA (Europe, Middle East and Africa). SYKES also provides various enterprise support services in the Americas and fulfillment services in EMEA, which include multi-lingual sales order processing, payment processing, inventory control, product delivery and product returns handling. For additional information please visit www.sykes.com.  

Date - 06/05/2008