Form 8-K SYKES ENTERPRISES INC For: Feb 25

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

FOR IMMEDIATE RELEASE                     February 25, 2019

SYKES ENTERPRISES, INCORPORATED REPORTS

FOURTH QUARTER AND FULL YEAR 2018 FINANCIAL RESULTS

--Capacity rationalization drives comparable fourth quarter operating margin expansion

--Incremental opportunity for capacity rationalization remains

--Fourth quarter 2018 revenues at the mid-point of the business outlook range adjusted for foreign exchange volatility

--2019 business outlook reflects comparable growth in revenues, implied operating margins and diluted earnings per share

TAMPA, FL – February 25, 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 fourth-quarter and full-year ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights

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 4.1% to $334.1 million, or 80.5% of total revenues, for the fourth quarter of 2018 compared to $348.5 million, or 83.1% 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 3.2% comparably, with the decline driven by softness in the communications vertical split between lower demand and operational inefficiencies, a slight decline in the technology vertical and the strategic decision to discontinue a program, which was in the financial services vertical. All of these factors more than offset new client wins as well as existing and new program expansion across the healthcare, transportation & leisure, and other verticals, which includes retail.

The Americas income from operations for the fourth quarter of 2018 increased 0.9% to $36.7 million, with an operating margin of 11.0% versus 10.4% in the comparable quarter last year. On a non-GAAP basis, the Americas operating margin was 13.2% versus 12.3% in the comparable quarter last year, with the increase due primarily to actions related to capacity rationalization coupled with improving mix of business in the U.S. (see Exhibit 7 for reconciliation).

EMEA Region

Revenues from the Company’s Europe, Middle East and Africa (EMEA) region increased 14.6% to $81.1 million, representing 19.5% of total revenues, for the fourth quarter of 2018, compared to $70.7 million, or 16.9% 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 19.0% on a comparable basis driven by new client wins as well as existing and new program expansion principally within the technology, financial services, transportation & leisure and other verticals, which includes retail, more than offsetting the lower demand in the communications vertical.

The EMEA region’s income from operations for the fourth quarter of 2018 increased 19.7% to $4.6 million, with an operating margin of 5.6% versus 5.4% in the comparable quarter last year. On a non-GAAP basis, the operating margin increased to 7.2% from 5.9% in the year-ago period due principally to broad-based demand growth accompanied by higher agent productivity. The year-ago period included costs related to capacity additions, including the launch of the Larnaca, Cyprus operation as a new delivery geography along with the related ramp costs in conjunction with the expansion of the at-home agent platform across EMEA (see Exhibit 7 for reconciliation).

Other

Other loss from operations, which includes primarily corporate as well as some other costs, decreased to $13.2 million, or 3.2% of revenues in the fourth quarter of 2018, compared to $16.8 million, or 4.0% of revenues in the prior year period. The fourth quarter of 2018 includes a $1.4 million benefit, or 30 basis points, related to previously discussed mark-to-market adjustment, which is partially offset by $0.6 million of merger and integration costs related to the acquisitions of WhistleOut and Symphony. The year-ago comparable period also includes merger and integration costs of $0.05 million related to the acquisition of certain assets of a Global 2000 Telecommunications Services Provider. The comparable decrease in other loss reflects lower performance-based compensation resulting from a difference between actual and projected performance targets and the previously discussed mark-to-market benefit related to stock-based deferred compensation programs funded through Rabbi Trust investments.

On a non-GAAP basis, other loss from operations decreased to 3.0% of revenues from 4.0% in the year-ago period due to aforementioned reason. (see Exhibit 7 for reconciliation).

Other Income (Expense) and Taxes

Total other income (expense), net for the fourth quarter of 2018 was $(3.8) million compared to $(2.3) million for the same period in the prior year, with the increase in expenses principally a corresponding offset to the previously discussed mark-to-market benefit to the other line item, reflecting the decline in global financial markets which impacted our Rabbi Trust investment performance.

The Company recorded an effective tax rate of 29.5% in the fourth quarter of 2018 versus 180.6% in the same period last year and above the estimated 17.0% provided in the Company’s November 2018 business outlook. The rate differential compared to the same period last year was primarily a function of the passage in December 2017 of the Tax Cuts and Jobs Act where in the year-ago period the Company recognized additional tax expense of $32.7 million, the provisional amount related to the one-time transition tax on undistributed foreign earnings. The increase in the effective tax rate relative to the Company’s business outlook was split roughly evenly between a shift in the geographic mix of earnings to higher tax rate jurisdictions and discrete items, including the creation of a valuation allowance related to uncertainty around utilization of deferred tax assets in certain jurisdictions.

On a non-GAAP basis, the fourth quarter 2018 effective tax rate was 27.6% compared to 28.3% in the same period last year and above the estimated 19.0% provided in the Company’s November 2018 business outlook (see Exhibit 11 for reconciliation) with increase relative to the business outlook due to aforementioned factors.

Full-Year 2018 Financial Highlights

Liquidity and Capital Resources

The Company’s balance sheet at December 31, 2018 remained strong with cash and cash equivalents of $128.7 million, of which approximately 89.9%, or $115.7 million, was held in international operations and the majority of which will not be subject to additional taxes if repatriated to the United States. During the year, the Company paid down $173 million of debt while partially funding through internally generated cash flows the acquisitions of Symphony and WhistleOut. Net cash provided by operating activities in 2018 decreased to $109.1 million from $134.8 million in 2017 due principally to working capital swing factors, most of which are timing related. At December 31, 2018, the Company had $102.0 million in borrowings outstanding under its previous $440.0 million credit facility, which was increased to $500.0 million under a revised credit agreement filed February 2019.

Business Outlook

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

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

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

Conference Call

The Company will conduct a conference call regarding the content of this release tomorrow, February 26, 2019, 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/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.

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 to Global 2000 companies and their end customers primarily in the technology, financial services, healthcare, communications and transportation & leisure industries. SYKES’ differentiated full lifecycle management services platform effectively engage customers at every touchpoint within the customer journey, including digital marketing and acquisition, sales expertise, customer service, technical support and retention. 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 our 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. Its 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 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, 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