0001564590-19-039779.txt : 20191104 0001564590-19-039779.hdr.sgml : 20191104 20191104160546 ACCESSION NUMBER: 0001564590-19-039779 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20191104 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20191104 DATE AS OF CHANGE: 20191104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYKES ENTERPRISES INC CENTRAL INDEX KEY: 0001010612 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 561383460 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28274 FILM NUMBER: 191189781 BUSINESS ADDRESS: STREET 1: 400 NORTH ASHLEY DRIVE CITY: TAMPA STATE: FL ZIP: 33602 BUSINESS PHONE: 8132741000 MAIL ADDRESS: STREET 1: 400 NORTH ASHLEY DRIVE CITY: TAMPA STATE: FL ZIP: 33602 8-K 1 syke-8k_20191104.htm 8-K syke-8k_20191104.htm
false SYKES ENTERPRISES INC 0001010612 0001010612 2019-11-04 2019-11-04

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 4, 2019

 

   

 

Sykes Enterprises, Incorporated

(Exact name of registrant as specified in its charter)

 

Florida

 

0-28274

 

56-1383460

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

 

 

 

 

400 N. Ashley Drive, Suite 2800, Tampa, Florida

 

33602

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (813274-1000

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

SYKE

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


 


 

Item 2.02.  Results of Operations and Financial Condition.

 

On November 4, 2019, Sykes Enterprises, Incorporated issued a press release announcing its financial results for the three and nine months ended September 30, 2019. The press release is attached as Exhibit 99.1.

 

Item 9.01.  Financial Statements and Exhibits.

 

(d) The following exhibit is included with this Report:

 

 

Exhibit 104

The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.

 

(Remainder of page intentionally left blank.)

 


2

 


 

SIGNATURE

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

SYKES ENTERPRISES, INCORPORATED

 

 

 

 

 

 

 

By:

 

/s/ John Chapman

 

 

 

 

John Chapman

Chief Finance Officer

 

 

 

 

 

Date: November 4, 2019

 

 

 

 

 

3

 

EX-99.1 2 syke-ex991_6.htm EX-99.1 syke-ex991_6.htm

 

EXHIBIT 99.1

 

 

     News Release     

 

 

 

news release

FOR IMMEDIATE RELEASE

November 4, 2019

 

SYKES ENTERPRISES, INCORPORATED REPORTS

THIRD QUARTER 2019 FINANCIAL RESULTS

 

--Third quarter 2019 diluted earnings per share exceed business outlook expectations

--Increased capacity utilization improved comparable operating margin performance amid

ramp for projected demand growth

--The Company continued its share buyback during the quarter

--Updating 2019 business outlook

 

TAMPA, FL – November 4, 2019 – Sykes Enterprises, Incorporated ("SYKES" or the “Company”) (NASDAQ: SYKE), a leading provider of multichannel demand generation and global customer engagement services, announced today its financial results for the third-quarter ended September 30, 2019.

 

Third Quarter 2019 Financial Highlights

 

 

Third quarter 2019 revenues of $397.5 million decreased $1.8 million, or 0.4%, from $399.3 million in the comparable quarter last year, with the change due to foreign exchange volatility

 

 

 

Non-GAAP third quarter 2019 constant currency revenues (see section titled “Non-GAAP Financial Measures” for an explanation and see Exhibit 12 for reconciliation) increased 0.7% comparably, driven by demand growth stemming from new client wins as well as existing and new program expansion across the financial services, technology, healthcare, transportation & leisure verticals, all of which was substantially moderated by the previously discussed (over the last several quarters) softness in the communication vertical. Specifically, most of the softness in the communications vertical was driven by the Company’s once-largest client, whose impact has been steadily diminishing, coupled with the rapid ramp down of another communications client, which the Company discussed last quarter, whose contract renewal did not align with the Company’s forecasted target margins. Non-GAAP constant currency revenues exclude the impact of foreign exchange rate movements in the third quarter of 2019 versus the year-ago period

 

 

 

Third quarter 2019 income from operations increased 71% to $24.7 million along with operating margins that increased to 6.2% from 3.6% for the comparable period last year. Third quarter 2019 operating margins reflect a 120 basis points impact from acquisition related intangibles and fixed-asset write-ups and a 50 basis points impact from merger and integration costs related to WhistleOut and Symphony Ventures. In the year-ago period, operating margins were impacted by 200 basis points of Americas restructuring expenses related to capacity rationalization actions, 110 basis

 

1

 

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

 


 

points from acquisition related intangibles and fixed-asset write-ups and 70 basis points from merger and integration costs related to the acquisitions of Portent, WhistleOut and Symphony Ventures

 

 

 

On a non-GAAP basis (see Exhibit 6 for reconciliation), which excludes the impact of acquisition related intangibles and fixed-asset write-ups, Americas restructuring and merger and integration costs, third quarter 2019 operating margin was 7.9% versus 7.4% in the same period last year. The increase in the comparable operating margins was primarily due to benefits from the capacity rationalization actions, which tailed off toward the first half of 2019, and improved operational performance. The Company delivered strong comparable operating margin performance in the quarter despite costs, as outlined in the prior quarter earnings release, related to longer than expected ramps because of wins with clients who are new adopters to outsourcing and whose programs have a higher level of complexity and speed to competency

 

 

 

Third quarter 2019 diluted earnings per share were $0.44 versus $0.33 in the same period last year with the third quarter 2019 diluted earnings per share increase due to improved operational performance as discussed above coupled with a lower share count (which was $0.01 favorable)

 

 

 

On a non-GAAP basis, third quarter 2019 diluted earnings per share were $0.56 versus $0.59 on a comparable basis (see Exhibit 6 for reconciliation). The decline in comparable diluted earnings per share was principally due to a combination of higher comparable effective tax rate and higher other expenses versus the same period last year partially offset by a lower share count. Equalizing the tax rate, other expenses and share count with what was reported in the prior-year period, third quarter 2019 diluted earnings per share would have been higher over the same period last year

 

 

 

Consolidated capacity utilization rate increased to 73% in the third quarter of 2019 from 70% in the same period last year, due to benefits from capacity rationalization actions

 

 

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), decreased 3.2% to $318.1 million, or 80.0% of total revenues, for the third quarter of 2019 compared to $328.8 million, or 82.3% of total revenues, in the same prior-year period. On a constant currency basis (a non-GAAP measure, see Exhibit 12 for reconciliation), the Americas revenues decreased 3.0% comparably, with the decline driven by the communications vertical, split between continued lower demand from its once-largest client and the aforementioned rapid ramp down of another communications client, all of which more than offset demand from new client wins as well as existing and new program expansion across the healthcare, transportation & leisure, technology and financial services verticals. Excluding the impact of the once-largest client, Americas revenues would have increased compared to the same period last year.

 

The Americas income from operations for the third quarter of 2019 increased 34.5% to $34.5 million, with an operating margin of 10.9% versus 7.8% in the comparable quarter last year. On a non-GAAP basis, the Americas operating margin was unchanged comparably at 12.1% due to benefits from capacity rationalization actions, which were partially mitigated by the impact of lower demand from

2

 

 

 


the communications vertical coupled with previously discussed longer than expected ramp costs (see Exhibit 7 for reconciliation).

 

EMEA Region

Revenues from the Company’s Europe, Middle East and Africa (EMEA) region increased 12.6% to $79.4 million, representing 20.0% of total revenues, for the third quarter of 2019, compared to $70.5 million, representing 17.7% 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 18.0% on a comparable basis driven by new client wins as well as existing and new program expansion principally within the technology, financial services, healthcare, transportation & leisure and other verticals, which includes retail, more than offsetting the softness in the communications vertical. The EMEA region revenue growth reflects the contribution of the Symphony acquisition.

 

The EMEA region’s income from operations for the third quarter of 2019 increased 11.6% to $5.7 million, with an operating margin of 7.2%, unchanged versus the comparable quarter last year. On a non-GAAP basis, the operating margin increased to 8.9% from 7.6% in the year-ago period due principally to higher growth and higher agent productivity (see Exhibit 7 for reconciliation).

 

Other

Other loss from operations, which includes primarily corporate as well as some other costs, decreased to $15.5 million, or 3.9% of revenues in the third quarter of 2019, compared to $16.3 million, or 4.1% of revenues in the prior year period. The third quarter of 2019 and the year-ago comparable period include merger and integration costs of $1.1 million and $0.8 million, respectively, related to the acquisitions of WhistleOut and Symphony. Excluding the aforementioned merger and integration costs, the comparable decrease in other loss reflected lower performance-based compensation resulting from a difference between actual and projected performance targets.

 

On a non-GAAP basis, other loss from operations decreased to 3.6% of revenues from 3.9% in the year-ago period. The current period reflects lower performance-based compensation resulting from a difference between actual and projected performance targets (see Exhibit 7 for reconciliation).

 

Other Income (Expense) and Taxes

Total other income (expense), net for the third quarter of 2019 was $(0.9) million compared to $(0.1) million for the same period in the prior year, with the difference largely due to significant foreign transaction gains in the prior year period, which resulted primarily from exchange rate fluctuations in U.S. dollar denominated assets and liabilities held by the Company's foreign subsidiaries.

 

The Company recorded an effective tax rate of 23.9% in the third quarter of 2019 versus 4.4% in the same period last year and roughly in-line with the estimated 24.0% provided in the Company’s July 2019 business outlook. The rate differential compared to the same period last year was largely driven by the resolution of uncertain tax positions and ancillary issues in the year ago period.

 

On a non-GAAP basis, the third quarter 2019 effective tax rate was 23.9% compared to 16.3% in the same period last year and roughly in-line with the estimated 24.0% provided in the Company’s July 2019 business outlook (see Exhibit 11 for reconciliation) due to aforementioned factors.

 

Liquidity and Capital Resources

The Company’s balance sheet at September 30, 2019 remained strong with cash and cash equivalents of $142.6 million, of which approximately 88.9%, or $126.8 million, was held in international operations

3

 

 

 


and the majority of which will not be subject to additional taxes if repatriated to the United States. During the quarter, the Company repurchased approximately 369 thousand shares at an average price of $27.38 per share for a total of $10.1 million. The Company has roughly 3.6 million shares remaining under its 10 million share repurchase program authorized in August 2011 and amended in March of 2016.  At September 30, 2019, the Company had $77.0 million in borrowings outstanding, down $15.0 million sequentially, under its $500.0 million credit agreement.

 

Business Outlook

 

 

The Company delivered healthy operating performance in the third quarter. Underlying demand remains consistent with the strong trends highlighted in the second quarter. Based on the opportunities the Company anticipates across its vertical markets mix, it is increasingly confident with the current consensus revenue growth projections for 2020 despite the revision in revenues for the remainder of 2019. Moreover, even with the updated revenue revision for 2019, the Company’s implied income from operations and operating margin for 2019 is projected to be higher than what was implied in its previous business outlook in July 2019 due to continued strong operational performance;

 

 

The downward revisions to revenue and diluted earnings per share for the balance of 2019 relative to the mid-point in the prior outlook provided July 2019 are approximately $22 million and approximately $0.03 net, respectively. The driver of the revenue change is split roughly equally among foreign exchange volatility, lower revenues from its once-largest communications client and elongated ramps. The approximately $0.04 diluted earnings per share impact is primarily a function of higher effective tax rate than previously forecasted, partially offset by a $0.01 benefit from lower interest expenses relative to prior forecast;

 

 

The Company’s revenues and earnings per share assumptions for the fourth quarter and full year 2019 are based on foreign exchange rates as of October 2019. 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;

 

 

The Company anticipates total other interest income (expense), net of approximately $(1.0) million for the fourth quarter and $(3.8) million for the full year 2019. The full year 2019 amount is expected to be lower than provided previously due to a lower average debt balance and lower interest rate. The amounts in the other interest income (expense), net, however, exclude the potential impact of any future foreign exchange gains or losses; and

 

 

The Company expects its full-year 2019 effective tax rate to be slightly higher than previously forecasted due largely to a shift in the mix of earnings to higher tax rate jurisdictions.

 

Considering the above factors, the Company anticipates the following financial results for the three months ending December 31, 2019:

 

 

Revenues in the range of $415.0 million to $420.0 million

 

Effective tax rate of approximately 27.0%; 27.0% on a non-GAAP basis**

 

Fully diluted share count of approximately 41.3 million

 

Diluted earnings per share of approximately $0.54 to $0.58

 

**Non-GAAP diluted earnings per share in the range of $0.64 to $0.68

 

Capital expenditures in the range of $13.0 million to $16.0 million

4

 

 

 


 

For the twelve months ending December 31, 2019, the Company anticipates the following financial results:

 

 

Revenues in the range of $1,604.0 million to $1,609.0 million

 

Effective tax rate of approximately 25.0%; 25.0% on a non-GAAP basis**

 

Fully diluted share count of approximately 41.8 million

 

Diluted earnings per share of approximately $1.52 to $1.56

 

**Non-GAAP diluted earnings per share in the range of $2.07 to $2.11

 

Capital expenditures in the range of $37.0 million to $40.0 million

 

**See Exhibit 10 for fourth quarter and full-year 2019 non-GAAP diluted earnings per share and Exhibit 11 for the third quarter, fourth quarter and full-year 2019 non-GAAP tax rate reconciliations.

 

Conference Call

The Company will conduct a conference call regarding the content of this release tomorrow, November 5, 2019, at 10:00 a.m. Eastern Standard 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

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. The Company, however, uses non-GAAP measures as a way to assist readers in further understanding the Company’s results. The Company believes these non-GAAP financial measures are important indicators of performance as they are intrinsic to how management evaluates and rewards performance from its underlying operations. Constant currency organic revenue growth, which is a non-GAAP measure, for instance, facilitates comparability between time periods as this presentation allows the Company to isolate the effect of acquisition-related revenues and exchange rate differences by assuming a constant exchange rate between periods for translation. Similarly, amortization of intangible assets and depreciation of the step up in value of purchased tangible assets are excluded for purposes of calculating the non-GAAP financial measures – including but not limited to 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 – because the Company does not acquire businesses on a predictable cycle and the exclusion facilitates a more meaningful evaluation of current operating performance and comparison to operating performance in other periods as well as performance relative to its peers who are not acquisitive or as acquisitive. The Company also excludes the impact or any corresponding reversals of material restructurings approved by the appropriate level of management, gain or loss on sale of facilities, release of cumulative translation adjustment (CTA), lease obligations and facility exit costs, severance and related costs, non-cash impairment charges, merger and integration costs associated with an acquisition and accretion of interest on contingent consideration of an acquisition from non-GAAP Income (loss) from operations and non-GAAP net income because the amounts are not reflective of ongoing operating results and do not contribute to a meaningful evaluation of current operating performance or comparison to operating performance in other periods. Refer to the exhibits in the release for detailed reconciliations.

 

5

 

 

 


About Sykes Enterprises, Incorporated

Sykes Enterprises, Incorporated (“SYKES” or “the Company”) is a leading provider of multi-channel demand generation and global customer engagement services. The Company provides differentiated full lifecycle customer engagement solutions and services primarily to Global 2000 companies and their end customers principally in the financial services, communications, technology, transportation & leisure and healthcare industries. SYKES’ differentiated full lifecycle management services platform effectively engages customers at every touchpoint within the customer journey, including digital marketing and acquisition, sales expertise, customer service, technical support and retention, many of which can be optimized by a suite of robotic process automation (“RPA”) and artificial intelligence (“AI”) solutions. The Company serves its clients through two geographic operating regions: the Americas (United States, Canada, Latin America, South Asia and Asia Pacific) and EMEA (Europe, the Middle East and Africa). Its Americas and EMEA regions primarily provide customer-engagement solutions and services with an emphasis on inbound multichannel demand generation, customer service and technical support to its clients’ customers. These services are delivered through multiple communication channels including phone, email, social media, text messaging, chat and digital self-service. The Company also provides various enterprise support services in the United States that include services for its clients’ internal support operations, from technical staffing services to outsourced corporate help desk services. In Europe, the Company provides fulfillment services, which includes order processing, payment processing, inventory control, product delivery and product returns handling. Additionally, through the acquisition of RPA provider Symphony Ventures Ltd (“Symphony”) coupled with its investment in AI through XSell Technologies, Inc. (“XSell”), the Company also provides a suite of solutions such as consulting, implementation, hosting and managed services that optimizes its differentiated full lifecycle management services platform. SYKES’ complete service offering helps its clients acquire, retain and increase the lifetime value of their customer relationships. The Company has developed an extensive global reach with customer engagement centers across six continents, including North America, South America, Europe, Asia, Australia and Africa. It delivers cost-effective solutions that generate demand, enhance the customer service experience, promote stronger brand loyalty, and bring about high levels of performance and profitability. For additional information please visit www.sykes.com.

 

Forward-Looking Statements

This press release may contain "forward-looking statements," including SYKES’ estimates of its 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 are intended to identify such forward-looking statements.  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, (iii) SYKES’ ability of maintaining margins, (iv) SYKES’ ability to continue the growth of its support service revenues, (v) currency fluctuations, (vi) the timing of significant orders for SYKES’ products and services, (vii) loss or addition of significant clients, (viii) the early termination of contracts by clients, (ix) SYKES’ ability to recognize deferred revenue through delivery of products or satisfactory performance of services, (x) construction delays of new or expansion of existing customer support centers, (xi) difficulties or delays in implementing SYKES’ bundled service offerings, (xii) failure to achieve sales, marketing and other objectives, (xiii) variations in the terms and the elements of services offered under SYKES’ standardized contract including those for future bundled service offerings, (xiv) changes in applicable accounting principles or interpretations of such principles, (xv) delays in the Company's ability to develop new products and services and market acceptance of new products and services, (xvi) rapid technological change, (xvii) political and country-specific risks

6

 

 

 


inherent in conducting business abroad, (xviii) SYKES’ ability to attract and retain key management personnel, (xix) SYKES’ ability to further penetrate into vertically integrated markets, (xx) SYKES’ ability to expand its global presence through strategic alliances and selective acquisitions, (xxi) SYKES’ ability to continue to establish a competitive advantage through sophisticated technological capabilities, (xxii) the ultimate outcome of any lawsuits or penalties (regulatory or otherwise), (xxiii) SYKES’ dependence on trends toward outsourcing, (xxiv) 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, (xxv) the existence of substantial competition, (xxvi) the ability to obtain and maintain grants and other incentives, including tax holidays or otherwise, (xxvii) risks related to the integration of the businesses of SYKES, including Qelp, Clearlink, WhistleOut and Symphony. (xxviii) the ability to execute on initiatives to address inefficiencies around recruitment and retention in the U.S. and rationalize underutilized capacity methodically and (xxix) 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.

 

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,

 

 

2019

 

 

2018

 

Revenues

$

397,547

 

 

$

399,333

 

Direct salaries and related costs

 

(253,669

)

 

 

(261,474

)

General and administrative

 

(102,620

)

 

 

(105,148

)

Depreciation, net

 

(12,449

)

 

 

(14,072

)

Amortization of intangibles

 

(4,103

)

 

 

(3,638

)

Impairment of long-lived assets

 

 

 

 

(555

)

Income from operations

 

24,706

 

 

 

14,446

 

Total other income (expense), net

 

(912

)

 

 

(66

)

Income before income taxes

 

23,794

 

 

 

14,380

 

Income taxes

 

(5,689

)

 

 

(628

)

Net income

$

18,105

 

 

$

13,752

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

0.44

 

 

$

0.33

 

Diluted

$

0.44

 

 

$

0.33

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

41,190

 

 

 

42,136

 

Diluted

 

41,307

 

 

 

42,204

 


8

 

 

 


Sykes Enterprises, Incorporated

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

Exhibit 2

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

Revenues

$

1,189,478

 

 

$

1,210,489

 

Direct salaries and related costs

 

(767,558

)

 

 

(801,470

)

General and administrative

 

(311,582

)

 

 

(309,625

)

Depreciation, net

 

(39,398

)

 

 

(43,468

)

Amortization of intangibles

 

(12,516

)

 

 

(11,480

)

Impairment of long-lived assets

 

(1,711

)

 

 

(9,256

)

Income from operations

 

56,713

 

 

 

35,190

 

Total other income (expense), net

 

(2,815

)

 

 

(2,457

)

Income before income taxes

 

53,898

 

 

 

32,733

 

Income taxes

 

(12,837

)

 

 

(855

)

Net income

$

41,061

 

 

$

31,878

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

0.98

 

 

$

0.76

 

Diluted

$

0.98

 

 

$

0.76

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

41,808

 

 

 

42,070

 

Diluted

 

41,908

 

 

 

42,201

 


9

 

 

 


Sykes Enterprises, Incorporated

Segment Results

(in thousands)

(Unaudited)

Exhibit 3

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

Americas

$

318,097

 

 

$

328,762

 

EMEA

 

79,427

 

 

 

70,543

 

Other

 

23

 

 

 

28

 

Total

$

397,547

 

 

$

399,333

 

 

 

 

 

 

 

 

 

Operating Income (Loss):

 

 

 

 

 

 

 

Americas

$

34,516

 

 

$

25,666

 

EMEA

 

5,688

 

 

 

5,098

 

Other

 

(15,498

)

 

 

(16,318

)

Income from operations

 

24,706

 

 

 

14,446

 

 

 

 

 

 

 

 

 

Total other income (expense), net

 

(912

)

 

 

(66

)

Income taxes

 

(5,689

)

 

 

(628

)

Net income

$

18,105

 

 

$

13,752

 

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

Americas

$

953,181

 

 

$

996,524

 

EMEA

 

236,231

 

 

 

213,890

 

Other

 

66

 

 

 

75

 

Total

$

1,189,478

 

 

$

1,210,489

 

 

 

 

 

 

 

 

 

Operating Income (Loss):

 

 

 

 

 

 

 

Americas

$

91,168

 

 

$

71,354

 

EMEA

 

11,840

 

 

 

11,957

 

Other

 

(46,295

)

 

 

(48,121

)

Income from operations

 

56,713

 

 

 

35,190

 

 

 

 

 

 

 

 

 

Total other income (expense), net

 

(2,815

)

 

 

(2,457

)

Income taxes

 

(12,837

)

 

 

(855

)

Net income

$

41,061

 

 

$

31,878

 

 


10

 

 

 


Sykes Enterprises, Incorporated

Consolidated Balance Sheets and Supplementary Data

(in thousands, except seat data)

(Unaudited)

Exhibit 4

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets:

 

 

 

 

 

 

 

Current assets

$

535,477

 

 

$

516,637

 

Property and equipment, net

 

122,106

 

 

 

135,418

 

Operating lease right-of-use assets

 

203,417

 

 

 

 

Goodwill & intangibles, net

 

464,279

 

 

 

476,548

 

Other noncurrent assets

 

48,785

 

 

 

43,364

 

Total assets

$

1,374,064

 

 

$

1,171,967

 

 

 

 

 

 

 

 

 

Liabilities & Shareholders' Equity:

 

 

 

 

 

 

 

Current liabilities

$

247,066

 

 

$

185,580

 

Noncurrent liabilities

 

288,847

 

 

 

159,778

 

Shareholders' equity

 

838,151

 

 

 

826,609

 

Total liabilities and shareholders' equity

$

1,374,064

 

 

$

1,171,967

 

 

 

 

Geographic Mix

(% of Total Revenues)

 

 

Q3 2019

 

 

Q3 2018

 

Americas (1)

 

80

%

 

 

82

%

Europe, Middle East & Africa (EMEA)

 

20

%

 

 

18

%

Other

 

0

%

 

 

0

%

Total

 

100

%

 

 

100

%

 

(1)

Includes the United States, Canada, Latin America, South Asia and the Asia Pacific Rim (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.

 

 

Vertical Industry Mix

(% of Total Revenues)

 

 

Q3 2019

 

 

Q3 2018

 

Financial Services

 

32

%

 

 

29

%

Communications

 

22

%

 

 

27

%

Technology

 

20

%

 

 

19

%

Transportation & Leisure

 

9

%

 

 

8

%

Healthcare

 

5

%

 

 

4

%

Other

 

12

%

 

 

13

%

Total

 

100

%

 

 

100

%

 

 

Seat Capacity (2)

 

 

Q3 2019

 

 

Q3 2018

 

Americas

 

39,700

 

 

 

42,100

 

EMEA

 

7,800

 

 

 

7,500

 

Total

 

47,500

 

 

 

49,600

 

 

 

Capacity Utilization (2)

 

 

Q3 2019

 

 

Q3 2018

 

Americas

 

73

%

 

 

69

%

EMEA

 

75

%

 

 

76

%

Total

 

73

%

 

 

70

%

 

(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 of 2019, the Company had approximately, 2,600 virtual seats.

11

 

 

 


Sykes Enterprises, Incorporated

Cash Flow from Operations

(in thousands, except seat data)

(Unaudited)

Exhibit 5

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

Cash Flow From Operating Activities:

 

 

 

 

 

 

 

Net income

$

18,105

 

 

$

13,752

 

Depreciation

 

12,508

 

 

 

14,201

 

Amortization of intangibles

 

4,103

 

 

 

3,638

 

Amortization of deferred grants

 

(85

)

 

 

(189

)

Changes in assets and liabilities and other

 

6,619

 

 

 

10,664

 

Net cash provided by operating activities

$

41,250

 

 

$

42,066

 

 

 

 

 

 

 

 

 

Capital expenditures

$

8,101

 

 

$

10,621

 

Cash paid during period for interest

$

924

 

 

$

918

 

Cash paid during period for income taxes

$

5,618

 

 

$

3,339

 

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

Cash Flow From Operating Activities:

 

 

 

 

 

 

 

Net income

$

41,061

 

 

$

31,878

 

Depreciation

 

39,574

 

 

 

43,852

 

Amortization of intangibles

 

12,516

 

 

 

11,480

 

Amortization of deferred grants

 

(266

)

 

 

(533

)

Changes in assets and liabilities and other

 

4,701

 

 

 

2,773

 

Net cash provided by operating activities

$

97,586

 

 

$

89,450

 

 

 

 

 

 

 

 

 

Capital expenditures

$

24,491

 

 

$

36,853

 

Cash paid during period for interest

$

2,798

 

 

$

2,893

 

Cash paid during period for income taxes

$

18,185

 

 

$

15,423

 

 


12

 

 

 


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(in thousands, except per share data)

(Unaudited)

Exhibit 6

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

GAAP income from operations

$

24,706

 

 

$

14,446

 

Adjustments:

 

 

 

 

 

 

 

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

4,529

 

 

 

4,363

 

Merger & integration costs

 

2,063

 

 

 

2,898

 

Americas restructuring

 

 

 

 

8,065

 

Other

 

 

 

 

(70

)

Non-GAAP income from operations

$

31,298

 

 

$

29,702

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

GAAP net income

$

18,105

 

 

$

13,752

 

Adjustments:

 

 

 

 

 

 

 

2017 Tax Reform Act

 

 

 

 

(452

)

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

4,529

 

 

 

4,363

 

Merger & integration costs

 

2,063

 

 

 

2,898

 

Americas restructuring

 

 

 

 

8,065

 

Other

 

 

 

 

(70

)

Tax effect of the adjustments

 

(1,560

)

 

 

(3,745

)

Non-GAAP net income

$

23,137

 

 

$

24,811

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

GAAP net income, per diluted share

$

0.44

 

 

$

0.33

 

Adjustments:

 

 

 

 

 

 

 

2017 Tax Reform Act

 

 

 

 

(0.01

)

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

0.11

 

 

 

0.10

 

Merger & integration costs

 

0.05

 

 

 

0.07

 

Americas restructuring

 

 

 

 

0.19

 

Other

 

 

 

 

 

Tax effect of the adjustments

 

(0.04

)

 

 

(0.09

)

Non-GAAP net income, per diluted share

$

0.56

 

 

$

0.59

 


13

 

 

 


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information by Segment

(in thousands, except per share data)

(Unaudited)

Exhibit 7

 

 

Americas

 

 

EMEA

 

 

Other (1)

 

 

Three Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

GAAP income (loss) from operations

$

34,516

 

 

$

25,666

 

 

$

5,688

 

 

$

5,098

 

 

$

(15,498

)

 

$

(16,318

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related depreciation and

   amortization of property and equipment

   and purchased intangibles

 

3,473

 

 

 

4,072

 

 

 

1,056

 

 

 

291

 

 

 

 

 

 

 

Merger & integration costs

 

643

 

 

 

1,981

 

 

 

341

 

 

 

 

 

 

1,079

 

 

 

917

 

Americas restructuring

 

 

 

 

8,065

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70

)

Non-GAAP income (loss) from operations

$

38,632

 

 

$

39,784

 

 

$

7,085

 

 

$

5,389

 

 

$

(14,419

)

 

$

(15,471

)

 

(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,

 

 

2019

 

 

2018

 

GAAP income from operations

$

56,713

 

 

$

35,190

 

Adjustments:

 

 

 

 

 

 

 

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

14,266

 

 

 

13,439

 

Merger & integration costs

 

6,296

 

 

 

3,878

 

Americas restructuring

 

4,243

 

 

 

17,175

 

Other

 

 

 

 

4,406

 

Non-GAAP income from operations

$

81,518

 

 

$

74,088

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

GAAP net income

$

41,061

 

 

$

31,878

 

Adjustments:

 

 

 

 

 

 

 

2017 Tax Reform Act

 

 

 

 

(452

)

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

14,266

 

 

 

13,439

 

Merger & integration costs

 

6,296

 

 

 

3,878

 

Americas restructuring

 

4,243

 

 

 

17,175

 

Other

 

 

 

 

4,406

 

Tax effect of the adjustments

 

(6,029

)

 

 

(9,419

)

Non-GAAP net income

$

59,837

 

 

$

60,905

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

GAAP net income, per diluted share

$

0.98

 

 

$

0.76

 

Adjustments:

 

 

 

 

 

 

 

2017 Tax Reform Act

 

 

 

 

(0.01

)

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

0.34

 

 

 

0.32

 

Merger & integration costs

 

0.15

 

 

 

0.09

 

Americas restructuring

 

0.10

 

 

 

0.41

 

Other

 

 

 

 

0.11

 

Tax effect of the adjustments

 

(0.14

)

 

 

(0.24

)

Non-GAAP net income, per diluted share

$

1.43

 

 

$

1.44

 


15

 

 

 


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information by Segment

(in thousands, except per share data)

(Unaudited)

Exhibit 9

 

 

Americas

 

 

EMEA

 

 

Other (1)

 

 

Nine Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

GAAP income (loss) from operations

$

91,168

 

 

$

71,354

 

 

$

11,840

 

 

$

11,957

 

 

$

(46,295

)

 

$

(48,121

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related depreciation and

   amortization of property and equipment

   and purchased intangibles

 

11,021

 

 

 

12,522

 

 

 

3,245

 

 

 

917

 

 

 

 

 

 

 

Merger & integration costs

 

4,150

 

 

 

2,693

 

 

 

1,874

 

 

 

 

 

 

272

 

 

 

1,185

 

Americas restructuring

 

4,192

 

 

 

17,175

 

 

 

 

 

 

 

 

 

51

 

 

 

 

Other

 

 

 

 

4,069

 

 

 

 

 

 

87

 

 

 

 

 

 

250

 

Non-GAAP income (loss) from operations

$

110,531

 

 

$

107,813

 

 

$

16,959

 

 

$

12,961

 

 

$

(45,972

)

 

$

(46,686

)

 

(1)

Other includes corporate and other costs.


16

 

 

 


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(Unaudited)

Exhibit 10

 

 

Business Outlook

 

 

Three Months Ended

 

 

December 31, 2019

 

GAAP net income, per diluted share

$0.54 - $0.58

 

Adjustments:

 

 

 

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

0.11

 

Merger & integration costs

 

0.02

 

Americas restructuring

 

 

Tax effect of the adjustments

 

(0.03

)

Non-GAAP net income, per diluted share

$0.64 - $0.68

 

 

 

 

 

 

Business Outlook

 

 

Year Ended

 

 

December 31, 2019

 

GAAP net income, per diluted share

$1.52 - $1.56

 

Adjustments:

 

 

 

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

 

0.45

 

Merger & integration costs

 

0.17

 

Americas restructuring

 

0.10

 

Tax effect of the adjustments

 

(0.17

)

Non-GAAP net income, per diluted share

$2.07 - $2.11

 


17

 

 

 


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information

(Unaudited)

Exhibit 11

 

 

Three Months Ended September 30,

 

 

2019

 

 

2018

 

GAAP tax rate

24%

 

 

4%

 

Adjustments:

 

 

 

 

 

 

 

2017 Tax Reform Act

0%

 

 

2%

 

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

0%

 

 

3%

 

Merger & integration costs

0%

 

 

2%

 

Americas restructuring

0%

 

 

5%

 

Other

0%

 

 

0%

 

Non-GAAP tax rate

24%

 

 

16%

 

 

 

 

 

 

 

 

 

 

Business Outlook

 

 

Three Months Ended

 

 

Year Ended

 

 

December 31, 2019

 

 

December 31, 2019

 

GAAP tax rate

27%

 

 

25%

 

Adjustments:

 

 

 

 

 

 

 

Acquisition-related depreciation and amortization of

    property and equipment and purchased intangibles

0%

 

 

0%

 

Merger & integration costs

0%

 

 

0%

 

Americas restructuring

0%

 

 

0%

 

Other

0%

 

 

0%

 

Non-GAAP tax rate

27%

 

 

25%

 


18

 

 

 


Sykes Enterprises, Incorporated

Reconciliation of Non-GAAP Financial Information by Segment

(Unaudited)

Exhibit 12

 

 

Three Months Ended

September 30, 2019 vs. September 30, 2018 (2)

 

 

Americas

 

 

EMEA

 

 

Other (3)

 

 

Consolidated

 

GAAP revenue growth

 

-3.2

%

 

 

12.6

%

 

 

-17.9

%

 

 

-0.4

%

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency impact (1)

 

0.2

%

 

 

5.4

%

 

 

0.0

%

 

 

1.1

%

Non-GAAP constant currency organic revenue growth

 

-3.0

%

 

 

18.0

%

 

 

-17.9

%