SITEL Corporation (NYSE:SWW), a leading global provider of
outsourced customer support services, announced today its
preliminary financial results for the first quarter of 2006 ended
March 31, 2006. Revenue of $275.1 million exceeded the Company's
previously announced outlook range of $260 million to $270 million.
Earnings per share of $0.03 were within the previously announced
outlook range of $0.03 to $0.05. Summary of results for the first
quarter of 2006: -- Revenue of $275.1 million in Q1 06 increased
9.5% over Q1 05. -- Operating income of $9.3 million for Q1 06 was
up 63% from $5.7 million in Q1 05. -- Net income of $2.5 million,
or $0.03 per diluted share, in Q1 06 was up from a net income of
$1.1 million, or $0.01 per diluted share, in Q1 05. The Q1 06
results include approximately $0.01 per share or $800,000 of costs
incurred for external audit and legal fees related to the
previously announced review of a foreign subsidiary. -- Capital
expenditures, including capital leases, were $5.6 million, and
estimated depreciation was $8.2 million. The Company ended the
quarter with $27 million in cash and $23 million available under
our credit facility. Commenting on the first quarter results, Jim
Lynch, Chairman and CEO of SITEL Corporation, said, "We are pleased
with our performance trend. Our performance was particularly
impressive considering we had no revenue in the first quarter of
2006 from the Company's largest contract with General Motors, which
recently ended. This marks the 18th consecutive quarter the Company
has delivered revenue growth on a year-over-year basis. Mr. Lynch
continued, "Our efforts are gaining traction, particularly in
Europe where we are having success in turning around some
previously under-performing business units. As we continue to focus
on profitable growth, we expect to deliver improvements in net
income throughout the year." Business unit highlights for the first
quarter of 2006 The Company experienced continued growth in both
new and existing business. New business contracts in Europe reflect
the growing strength of this region and the benefits of having a
truly global footprint. Announced contract wins during the quarter
included: a contract with Europe Sony Service Centre Europe NV and
Sony e-Solutions Europe BV, both divisions of Sony Europe, to take
over operations of Sony's main contact center in Europe; a contract
with PagesJaunes (a subsidiary of France Telecom) to support an
estimated 1 million directory inquiries per month from SITEL's La
Rochelle, France contact center; and a four year contract with a
major North American communications company to provide customer
care in support of its B to B Internet services utilizing around
150 workstations. Also, during the quarter, the Company grew
revenue from new contract wins and expanded programs with existing
clients from around the world. Highlights include: the award of a
350 seat contract in Manila from one of the Company's major
financial services clients; growth from the North America
Telecommunications and Financial Services business units; an
initial award of a 250 seat contract for a European
telecommunications provider; and significant new client growth
across many of its businesses internationally, including the
Belgium and Netherlands business units, who both added significant
new clients. Overall in Europe, the Company is in start-up phase
with seven major clients. Program expansion across the majority of
the Company's offshore client base added to positive revenue growth
momentum. In the first quarter of 2006, business units in North
America delivered a 4% increase in revenue to $128.0 million from
$122.9 million in the first quarter of 2005. These gains were made
despite the end of the Company's largest contract with General
Motors. Revenue in all of the vertical business units in North
America was up in the first quarter of 2006 compared to the year
earlier quarter. The Consumer business unit more than doubled its
revenue during the quarter, primarily as a result of a government
contract performed in the fourth quarter of 2005 and first quarter
of 2006. Offshore locations also increased revenue, with the
Philippines business almost tripling its revenue in the current
quarter compared to the year earlier quarter. As workstation
utilization continued to improve and as higher margin offshore
business grew, many business units in North America recorded double
digit growth in their operating income in the first quarter
compared to the year earlier period. In particular the Consumer,
Insurance, and Telecommunication business units saw significant
strength. SITEL Risk Management, the collection arm of the Company,
also showed improvement in their post charge-off business. For
business units in Europe, revenue in the first quarter of 2006
increased 14.9% to $120.5 million from revenue of $104.9 million in
the first quarter of last year. Double-digit revenue growth from
business units in the Netherlands, Poland, Belgium, Germany and
Spain led the way in the overall improvement. The turnaround within
Europe is on track as operating margins in this region doubled in
the current quarter compared to the first quarter of 2005. The UK,
Belgium, France, and Nordics business units in total improved their
operating income by more than $2 million versus first quarter last
year and $4 million sequentially. The turnaround in margin
performance reflects the successful efforts of the Company's
restructuring, which began in the fourth quarter of 2004 in
combination with revenue growth. Workstation utilization is
improving throughout Europe, with over 10,600 of the total 11,500
workstations now under contract. Revenue in the first quarter of
2006 from business units in Latin America, excluding unconsolidated
joint ventures, increased 57% to $15.4 million from $9.8 million in
the first quarter of 2005. This region continues to expand,
especially for offshore initiatives, resulting in solid operating
margins. SITEL's unconsolidated joint ventures also continue to
expand with Colombia growing by more than 50% and Mexico continuing
a long trend of quarterly revenue growth. For the business units in
the Asia Pacific area, the Singapore business unit more than
doubled its revenue in the first quarter of 2006 compared to the
year earlier period, while New Zealand and Australia continued to
exhibit strong performance. Ramp up costs of offshore operations
for clients in Australia offset gains in operating income from the
other two units. In addition to the Company's core business, SITEL
Services, the newly formed SITEL Systems and SITEL Solutions
businesses continued to position and establish themselves, and are
poised for growth in the second half of 2006. These groups both
capitalize on the Company's 20 years of contact center operations
experience. At the core of their offerings is the ability to bring
straightforward solutions to clients' complex customer management
challenges leveraging both SITEL's practical experience and the
unique IT and telephony solutions demanded by the contact center
industry to provide both current clients and third party companies
with the very best customer touch models and applications. Mr.
Lynch further commented, "We are seeing strength in the marketplace
as capacity is pushed to its limits driven by strong demand from
both existing and new clients. As an industry leader in service
delivery and a global footprint, we are uniquely positioned to take
advantage of this improving market environment. I am confident our
success will continue as we move out of a significant ramp period
in the first half of 2006 and deliver improving profitability and
value for our shareholders." Outlook For the second quarter of
2006, the Company expects revenue to be within a range of $265
million to $275 million and earnings from $0.10 per share to $0.13
per share. The earnings outlook includes $6 million, or $0.08 per
share, recorded in the second quarter from a settlement of a
dispute with a business partner over the handling of certain
business transactions. For the settlement, SITEL received a payment
of $5 million in the second quarter of 2006 and will receive an
additional $1 million in installments during the second half of the
year. The second quarter outlook anticipates several European
contracts in start-up phase, which temporarily dilute margins until
they are fully operational in the third and fourth quarters leading
to margins in Europe growing at a faster rate than the expected
revenue growth. The full year 2006 previous revenue outlook is
unchanged at a range of $1 billion to $1.1 billion. For the full
year 2006, the earnings outlook has been adjusted to a range of
$0.32 to $0.36 per share increased from the previous outlook of
$0.30 to $0.33 per share mainly to reflect the $0.08 per share
settlement received less the earnings impact associated with the
loss of a client served by the settlement business partner and
additional cost associated with finalizing the review and audit
related to the foreign subsidiary. The above comments are based on
current expectations, exclude any non-recurring items, unless
otherwise stated, and supersede any prior outlook provided by the
Company. Restatement and Filing Form 10-K The Company previously
announced the Audit Committee of the Board of Directors was
reviewing accounting errors and other irregularities at one of the
Company's international subsidiaries. The Company also announced
that it expected that a restatement for the fiscal years 2000
through 2004 and potentially for the first three quarters of 2005
will be required to correct the accounting errors at that
subsidiary. The results discussed in this earnings release are
subject to the completion of the restatement and therefore are
considered preliminary. The preliminary results and historic
comparables included in today's announcement reflect the effect of
the restatement portion for the first quarter of 2005 currently
identified by the Company. Current estimates of the restatements
required may need to be adjusted, perhaps materially, when the
restated financial statements are filed. While the results reported
today are unaudited, SITEL believes that these results accurately
reflect, in all material respects, the results based on current
information and on the portion of the restated adjustments that
have been identified to date. Please refer to the following for a
comparison of the restated preliminary results to those originally
reported for the first quarter of 2005. Effects of the preliminary
restatement Because the restatements are not yet completed, the
expected impact of the restatement for the first quarter of 2005
contained herein is preliminary and subject to a final review by
management and the Audit Committee of the Board of Directors and
review by our external auditors. Three months ended March 31, 2005
The effects of the adjustments identified to date will reduce
earnings in the first quarter of 2005 by $400,000. These
adjustments reflect an increase in operating, selling and
administrative expenses of $100,000 (from the previously reported
$80.0 million to the restated $80.1 million) resulting primarily
from additional depreciation as well as penalties from the failure
to remit certain taxes and an increase in interest expense of
$300,000 (from the previously reported $2.9 million to the restated
$3.2 million) resulting primarily from the failure to remit certain
taxes. As a result of the reviews, the Company was required to
delay the filing of its 2005 Annual Report on Form 10-K, which was
due March 16, 2006, in order to allow for the Company and Audit
Committee's evaluation of these issues to be concluded and for its
external auditors to complete an audit of the Company's financial
statements. The Company will therefore also be required to delay
the filing of its first quarter 2006 Quarterly Report on Form 10-Q,
which is due May 10, 2006. Conference Call SITEL executive
management will host a conference call to discuss first quarter
2006 financial results tomorrow, May 11, 2006 at 8:30 a.m. ET. To
participate, for domestic callers, please dial 1-800-230-1092 and
for international callers, please dial 1-612-332-0107. Replay of
the conference call will be available in the U.S. by dialing
800-475-6701 and International by dialing 320-365-3844 (Access
Code) 827669, starting at 12:00 p.m. ET on May 11, 2006 and will
play for seven days. The conference call will be simulcast live on
the Internet via SITEL's web site at www.sitel.com. Replay will be
available for seven days. About SITEL SITEL is a leading global
provider of outsourced customer support services. On behalf of many
of the world's leading organizations, SITEL designs and improves
customer contact models across its clients' customer acquisition,
retention and development cycles. SITEL manages approximately two
million customer interactions per day via the telephone, e-mail,
Internet and traditional mail. SITEL has approximately 39,000
employees in 90 global contact centers, utilizing more than 32
languages and dialects to serve customers in 56 countries. SITEL is
a leader in the contact center industry. Please visit SITEL's web
site at www.sitel.com for further information. This news release
contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. The
words "expects," "anticipates," "will," and similar expressions in
this news release identify forward-looking statements, which speak
only as of the date the statement is made. SITEL assumes no
obligation to update any such forward-looking statement. Although
SITEL believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to be correct. Because
forward-looking statements involve risks and uncertainties, future
events and actual results could differ materially from those set
forth in, contemplated by or underlying the forward-looking
statements. Important factors that could cause actual results to
differ materially from SITEL's expectations may include, but are
not limited to the following, many of which are outside SITEL's
control: results of the review into the accounting errors and other
irregularities, completion of the audit of the Company's financial
statements, client budgets and plans, effectiveness of cost control
initiatives, effectiveness of revenue enhancement initiatives,
delays in approving new contact center initiatives or in moving
forward with previously approved initiatives, terms of final
contracts to be completed with clients, ability to negotiate
contracts on acceptable terms, contract termination provisions,
delays in ramp up of services, customer demand for client products
and services, the demand for off-shore services, delays in securing
necessary regulatory approvals, licenses, leases, personnel,
services and equipment for new facilities, competitive pressures in
SITEL's and its clients' industries and in local markets, reliance
on major clients, subcontractors and strategic partners, mergers
and restructurings involving clients or prospective clients,
industry regulation, reliance on telecommunications and computer
technology, unanticipated labor, contract or technical
difficulties, general and local economic trends and conditions, the
effects of leverage, currency translation, uncertainties of
litigation, risks associated with operating a global business, and
dependence on credit availability and credit market conditions.
SITEL's Form 10-K, 10-Q and 8-K reports filed with the Securities
and Exchange Commission describe other important factors that may
impact SITEL's business, results of operation and financial
condition and cause actual results to differ materially from those
set forth in, contemplated by or underlying the forward-looking
statements. -0- *T SITEL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (PRELIMINARY AND UNAUDITED) (in thousands,
except per share data) Three months ended March 31, 2006 2005
--------------------------------------------------------------- As
restated Revenue $275,110 $251,169
---------------------------------------------------------------
Operating expenses: Direct labor and telecommunications expenses
172,088 152,484 Subcontracted and other services expenses 8,620
12,880 Operating, selling and administrative expenses 85,095 80,088
Asset impairment and restructuring expenses -- --
---------------------------------------------------------------
Total operating expenses 265,803 245,452
---------------------------------------------------------------
Operating income 9,307 5,717
---------------------------------------------------------------
Other income (expense): Interest expense (3,725) (3,162) Interest
income 75 120 Equity in earnings of affiliates 289 (107) Other
expense, net 119 (10)
---------------------------------------------------------------
Total other expense, net (3,242) (3,159)
---------------------------------------------------------------
Income (loss) before income taxes, minority interest and change in
accounting method 6,065 2,558 Income tax expense 2,892 1,108
Minority interest 712 360
--------------------------------------------------------------- Net
income (loss) $2,461 $1,090
===============================================================
Weighted average common shares outstanding: Basic 74,162 73,736
Diluted 74,901 74,340 Earnings per share: Basic $0.03 $0.01 Diluted
$0.03 $0.01 SITEL Corporation Revenue Statistics - First Quarter
2006 Earnings Release (Preliminary and Unaudited) % of Total
Revenue Q105 Q205 Q305 Q405 2005 Q106 ------ ------ ------ ------
------ ------ Customer Acquisition 17.4% 16.1% 15.1% 14.4% 15.7%
16.5% Customer Care 57.1% 60.4% 61.7% 65.1% 61.2% 60.1% Technical
Support 18.0% 17.6% 16.9% 15.1% 16.9% 15.6% Risk Management 6.3%
5.5% 5.4% 4.6% 5.4% 5.8% Other 1.2% 0.4% 0.9% 0.8% 0.8% 2.0% ------
------ ------ ------ ------ ------ Total 100.0% 100.0% 100.0%
100.0% 100.0% 100.0% ====== ====== ====== ====== ====== ======
Geographic Mix % of Total Revenue Q105 Q205 Q305 Q405 2005 Q106
------ ------ ------ ------ ------ ------ North America 49.0% 47.7%
49.4% 53.7% 50.1% 46.7% Europe 42.9% 42.2% 39.1% 37.5% 40.3% 44.1%
Asia Pacific 4.9% 5.7% 6.1% 4.5% 5.3% 4.3% Latin America 3.2% 4.4%
5.4% 4.3% 4.3% 4.9% ------ ------ ------ ------ ------ ------ Total
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ====== ====== ======
====== ====== ====== Industry Mix % of Total Revenue Q105 Q205 Q305
Q405 2005 Q106 ------ ------ ------ ------ ------ ------ Insurance
6.1% 5.9% 5.9% 5.7% 5.9% 5.9% Financial Services 17.2% 17.1% 17.8%
16.0% 17.0% 18.6% Consumer Products 19.7% 21.4% 21.1% 19.7% 20.5%
13.5% Technology 26.3% 25.8% 24.1% 22.0% 24.4% 23.8% Energy and
Utilities 7.5% 7.5% 7.6% 7.2% 7.4% 7.2% Telecommunications, ISP,
and Cable 18.6% 19.9% 20.1% 18.8% 19.3% 22.1% Other 4.6% 2.4% 3.4%
10.6% 5.5% 8.9% ------ ------ ------ ------ ------ ------ Total
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ====== ====== ======
====== ====== ====== *T
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