Sykes Enterprises, Incorporated Reports Second-Quarter 2008 Financial Results

08/04/2008

Consolidated Revenues Increase 23.4 Percent Comparably, Boosting Operating Margins to 8.0 Percent; Raising 2008 Business Outlook

TAMPA, Fla., Aug 4, 2008 (PrimeNewswire via COMTEX News Network) -- Sykes Enterprises, Incorporated ("SYKES" or the "Company") (Nasdaq:SYKE), a global leader in providing outsourced customer contact management solutions and services in the business process outsourcing (BPO) arena, announced today its financial results for the second-quarter of 2008, the highlights of which are as follows:

                                      Second Quarter Second Quarter
 (in millions, except per share data)      2008           2007


  Revenues                                $207.6         $168.3
  Income from Operations                   $16.6           $7.5
  Net Income                               $17.7           $6.3
  EPS                                      $0.43          $0.16

 * Second quarter 2008 comparable revenue growth rate of 23.4% was
   split between existing and new client relationships at roughly
   60% and 40%, respectively

 * Second quarter 2008 comparable revenue growth remained broad
   based, with top-40 clients, which represented over three-quarters
   of total revenues, up 32.4%, reflecting continued strong demand
   and operational execution

 * Cash flow from operations for the second quarter was up 69% to
   $29.9 million from $17.7 million on a comparable basis, with cash
   and cash equivalents of $208.4 million and no outstanding debt as
   of June 30, 2008

Americas

Revenues generated from the Company's Americas segment, including operations in North America and offshore (Latin America and the Asia Pacific region), increased 21.5% to $137.5 million, or 66.2% of total revenues, for the second quarter of 2008. Revenues for the comparable prior-year period totaled $113.3 million, or 67.3% of total revenues. The comparable revenue increase reflects sustained growth in customer care demand from existing and new client programs, most notably within the technology, financial services and transportation verticals. Approximately 61% of the Americas' second quarter 2008 revenues was generated from services provided offshore compared to approximately 60% in the prior year quarter, reflecting continued growth in customer care demand offshore.

The Americas income from operations for the second quarter of 2008 was up 42.3% to $22.1 million, with the operating margin at 16.1% versus 13.7% in the comparable quarter last year. The 240 basis points comparable increase in Americas operating margins was largely due to strong revenue growth and the corresponding expense leverage resulting in lower salaries, facilities costs, depreciation and Canadian roadside assistance tow claims as a percent of Americas revenues. The Americas operating margin was further aided by the successful re-pricing or replacing of certain sub-profitable client programs, which is part of an on-going and often-discussed effort by the Company to enhance operating margins.

EMEA

Revenues from the Company's Europe, Middle East and Africa (EMEA) region increased 27.3% to $70.1 million, representing 33.8% of SYKES' total revenues for the second quarter of 2008 compared to $55.0 million, or 32.7%, in the prior year's second quarter. The $15.1 million comparable revenue increase was split between growth in customer care demand of $8.0 million and the contribution from a stronger Euro of $7.1 million. The growth in customer care demand was driven by programs with existing and new clients within the technology, communications, financial services and transportation verticals.

The EMEA income from operations for the second quarter of 2008 was up 88.1% to $4.1 million, with the operating margin at 5.8% versus 3.9% in the comparable quarter last year. The 190 basis points comparable increase in the EMEA operating margin was due to a combination of strong revenue growth and the corresponding expense leverage resulting in lower bad debts and facilities costs as a percent of EMEA revenues.

Corporate G&A Expenses

Corporate costs declined 6.2% to $9.6 million, or 4.6% of revenues, in the second quarter of 2008, compared to $10.2 million, or 6.1% of revenues, in the comparable quarter last year. The 150 basis points reduction in corporate general and administrative expenses was due largely to lower compensation costs related principally to our stock based compensation plan and lower professional fees.

Other Income and Taxes

Other income for the second quarter of 2008 totaled approximately $4.9 million compared to other income of $0.7 million for the same period in the prior year. The $4.2 million comparable increase in other income was primarily attributable to an increase in realized and unrealized foreign currency transactions gains. These gains resulted primarily from U.S. dollar denominated assets and liabilities held by the Company's foreign subsidiaries.

The Company's second quarter effective tax rate was 17.3% versus 22.0% in the same period last year and 25% provided in the Company's second quarter 2008 business outlook. The lower rate was due principally to a shift in the geographic mix of earnings to lower tax rate jurisdictions.

Liquidity and Capital Resources

Approximately $194.4 million, or 93%, of the Company's June 30 cash balance of $208.4 million was held in international operations and would be subject to additional taxes if repatriated back to the U.S. At June 30, 2008, the Company also had $50 million of capacity available under its credit facility. Cash flow from operations increased $12.2 million to $29.9 million in second quarter 2008 due largely to increases in net income and non-cash reconciliation items such as depreciation.

Business Outlook

The Company's third-quarter and full-year 2008 business outlook reflects a demand environment for its value proposition that thus far remains largely unchanged from the first half of the year. The Company continues to experience a healthy conversion of its new sales pipeline with new clients. Similarly, the Company continues to see expansion of existing and new programs with current clients. Although a handful of subscale programs - notably within the retail, appliance and handset lines of business - in the Company's embedded base of clients have been down a fraction due to either client-specific challenges or macro-economic unease. That downtick, however, has been partially offset by demand from new and existing programs with both current and new clients.

Client demand continues to be driven across various segments of the customer contact management industry. This includes clients within the business-to-consumer and business-to-business segments of the customer contact management industry that span the Americas and EMEA regions, as well as various verticals within those segments and regions, including technology, communications and financial services. Accordingly, the Company plans to add approximately 1,300 seats in the third quarter of 2008, 400 of which are seat additions originally anticipated in the second quarter of 2008 that are now expected to be deployed in the third quarter. These seat additions are slated for the U.S. and countries in Latin America. Therefore, the third quarter and, to a lesser extent, the fourth quarter are expected to be disproportionately impacted by advertising, recruiting and training expenses associated with these ramps. Also in the third quarter, the Company expects to implement planned wage increases in certain offshore geographies. Finally, third quarter business outlook further reflects the impact of summer seasonality on demand related to European holidays in the EMEA region.

Separately, the Company now expects a lower-than-projected tax rate for the third-quarter and full-year 2008 due to a combination of lower-than-expected taxable gains from hedging the Philippines Peso, which has weakened significantly versus the U.S. dollar, and the continued shift in the geographic mix of earnings to lower tax rate jurisdictions.

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

 * Revenues in the range of $205 million to $208 million
 * Tax rate of approximately 17% to 18%
 * EPS in the range of $0.26 to $0.29 per diluted share
 * Capital expenditures in the range of $12 million to $16 million

For the twelve months ended December 31, 2008, the Company anticipates the following financial results:

 * Revenues in the range of $825 million to $830 million
 * Tax rate of approximately 17% to 18%
 * EPS in the range of $1.39 to $1.44 per diluted share
 * Capital expenditures in the range of $30 million to $35 million

Conference Call

The Company will conduct a conference call regarding the content of this release tomorrow, August 5, 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. This press release is also posted on the SYKES website at http://investor.sykes.com/releases.cfm.

About Sykes Enterprises, Incorporated

SYKES is a global leader in providing customer contact management solutions and services in the business process outsourcing (BPO) 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 and reporting segments: the Americas (United States, Canada, Latin America 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 multi-lingual sales order processing, payment 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," 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 timing of significant orders for SYKES' products and services, (ii) variations in the terms and the elements of services offered under SYKES' standardized contract including those for future bundled service offerings, (iii) changes in applicable accounting principles or interpretations of such principles, (iv) difficulties or delays in implementing SYKES' bundled service offerings, (v) failure to achieve sales, marketing and other objectives, (vi) construction delays of new or expansion of existing customer support centers, (vii) delays in the Company's ability to develop new products and services and market acceptance of new products and services, (viii) rapid technological change, (ix) loss or addition of significant clients, (x) political and country-specific risks inherent in conducting business abroad, (xi) currency fluctuations, (xii) fluctuations in global business conditions and the global economy, (xiii) SYKES' ability to attract and retain key management personnel, (xiv) SYKES' ability to continue the growth of its support service revenues through additional technical and customer contact centers, (xv) SYKES' ability to further penetrate into vertically integrated markets, (xvi) SYKES' ability to expand its global presence through strategic alliances and selective acquisitions, (xvii) SYKES' ability to continue to establish a competitive advantage through sophisticated technological capabilities, (xviii) the ultimate outcome of any lawsuits or penalties (regulatory or otherwise), (xix) SYKES' ability to recognize deferred revenue through delivery of products or satisfactory performance of services, (xx) SYKES' dependence on trends toward outsourcing, (xxi) 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, (xxii) the existence of substantial competition, (xxiii) the early termination of contracts by clients, (xxiv) the ability to obtain and maintain grants and other incentives, including tax holidays or otherwise, (xxv) the impact of economic recessions in the U.S. and other parts of the world, and (xxvi) 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.

                      Sykes Enterprises, Incorporated
             Condensed Consolidated Statements of Operations
                  (in thousands, except per share data)
                                (Unaudited)

                                             Three Months Ended
                                             June 30,   June 30,
                                               2008       2007
                                            ---------  ---------

 Revenues                                   $ 207,629  $ 168,284
 Direct salaries and related costs           (133,708)  (110,464)
 General and administrative                   (57,355)   (50,351)
                                            ---------  ---------
 Income from operations                        16,566      7,469
 Other income, net                              4,866        652
                                            ---------  ---------
 Income before provision for income taxes      21,432      8,121
 Provision for income taxes                    (3,703)    (1,784)
                                            ---------  ---------
 Net income                                 $  17,729  $   6,337
                                            ---------  ---------

  Net income per basic share                $    0.44  $    0.16
  Shares outstanding, basic                    40,599     40,359

  Net income per diluted share              $    0.43  $    0.16
  Shares outstanding, diluted                  40,953     40,652

                   Sykes Enterprises, Incorporated
            Condensed Consolidated Statements of Operations
                (in thousands, except per share data)
                            (Unaudited)


                                               Six Months Ended
                                             June 30,    June 30,
                                               2008        2007
                                            ---------   ---------

 Revenues                                   $ 411,350   $ 336,285
 Direct salaries and related costs           (264,688)   (216,335)
 General and administrative                  (113,779)    (98,906)
                                            ---------   ---------
 Income from operations                        32,883      21,044
 Other income                                   7,117       1,529
                                            ---------   ---------
 Income before provision for income taxes      40,000      22,573
 Provision for income taxes                    (6,561)     (4,437)
                                            ---------   ---------
 Net income                                 $  33,439   $  18,136
                                            ---------   ---------

  Net income per basic share                $    0.82   $    0.45
  Shares outstanding, basic                    40,545      40,331

  Net income per diluted share              $    0.82   $    0.45
  Shares outstanding, diluted                  40,860      40,585

                      Sykes Enterprises, Incorporated
                             Segment Results
                              (in thousands)
                                (Unaudited)

                                     Three Months Ended
                                    June 30,   June 30,
                                      2008       2007
                                   ---------  ---------

 Revenues:
  Americas                         $ 137,539  $ 113,242
  EMEA                                70,090     55,042
                                   ---------  ---------
   Total                           $ 207,629  $ 168,284
                                   =========  =========

 Operating Income:
  Americas                         $  22,081  $  15,518
  EMEA                                 4,063      2,160
  Corporate G&A expenses              (9,578)   (10,209)
                                   ---------  ---------
  Income from operations              16,566      7,469

  Other income, net                    4,866        652
  Provision for income taxes          (3,703)    (1,784)
                                   ---------  ---------

  Net income                       $  17,729  $   6,337
                                   =========  =========


                                      Six Months Ended
                                    June 30,   June 30,
                                      2008       2007
                                   ---------  ---------

 Revenues:
  Americas                         $ 274,896  $ 227,205
  EMEA                               136,454    109,080
                                   ---------  ---------
   Total                           $ 411,350  $ 336,285
                                   =========  =========

 Operating Income:
  Americas                         $  43,943  $  35,571
  EMEA                                 8,683      5,060
  Corporate G&A expenses             (19,743)   (19,587)
                                   ---------  ---------
  Income from operations              32,883     21,044

  Other income                         7,117      1,529
  Provision for income taxes          (6,561)    (4,437)
                                   ---------  ---------

  Net income                       $  33,439  $  18,136
                                   =========  =========

                  Sykes Enterprises, Incorporated
               Condensed Consolidated Balance Sheets
                          (in thousands)

                                              June 30,   Dec. 31,
                                                2008       2007
                                             ---------  ---------
                                            (Unaudited)
 Assets:
 Current assets                              $ 402,095  $ 371,732
 Property and equipment, net                    78,544     78,574
 Other noncurrent assets                        56,972     55,169
                                             ---------  ---------
  Total assets                               $ 537,611  $ 505,475
                                             =========  =========

 Liabilities & Shareholders' Equity:
 Current liabilities                         $ 124,329  $ 118,379
 Noncurrent liabilities                         26,001     21,775
 Shareholders' equity                          387,281    365,321
                                             ---------  ---------
  Total liabilities and shareholders'
   equity                                    $ 537,611  $ 505,475
                                             =========  =========

                  Sykes Enterprises, Incorporated
                        Supplementary Data

                                              Q2 2008    Q2 2007
                                             ---------  ---------

 Geographic Mix (% of Total Revenues):

  Americas (1)                                   66.2%      67.3%
  Europe, Middle East & Africa (EMEA)            33.8%      32.7%
                                             ---------  ---------
   Total:                                       100.0%     100.0%

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


                                              Q2 2008    Q2 2007
                                             ---------  ---------

 Vertical Industry Mix (% of Total Revenues):

   Technology / Consumer                           34%        32%
   Communications                                  28%        34%
   Financial Services                              14%        13%
   Transportation & Leisure                        10%         7%
   Healthcare                                       6%         7%
   Other                                            8%         7%
                                             ---------  ---------
    Total:                                        100%       100%

                Sykes Enterprises, Incorporated
                  Cash Flow from Operations
                       (in thousands)
                         (Unaudited)

                                                Three Months Ended
                                                June 30,  June 30,
                                                  2008      2007
                                                --------  --------
 Cash Flow From Operating Activities:
  Net income                                    $ 17,729  $  6,337
  Depreciation and amortization                    7,177     6,053
  Changes in assets and liabilities and other      5,011     5,271
                                                --------  --------
  Net cash provided by operating activities     $ 29,917  $ 17,661
                                                ========  ========

 Capital expenditures                           $  8,185  $  7,773
 Cash interest paid                             $    153  $     12
 Cash taxes paid                                $  5,913  $  4,313

                                                Six Months Ended
                                                June 30,  June 30,
                                                  2008      2007
                                                --------  --------

 Cash Flow From Operating Activities:
  Net income                                    $ 33,439  $ 18,136
  Depreciation and amortization                   14,196    12,033
  Changes in assets and liabilities and other    (16,682)   (7,576)
                                                --------  --------
  Net cash provided by operating activities     $ 30,953  $ 22,593
                                                ========  ========

 Capital expenditures                           $ 16,248  $ 14,137
 Cash interest paid                             $    220  $     79
 Cash taxes paid                                $  9,974  $  6,585

This news release was distributed by PrimeNewswire, www.primenewswire.com

SOURCE: Sykes Enterprises, Inc.

Sykes Enterprises, Incorporated
          Subhaash Kumar
          (813) 233-7143