Stream Global Services Announces June 30, 2009 Second Quarter Results

Revenues of $126 million and Gross Profit of 42%


BOSTON, Aug. 4  /PRNewswire-FirstCall/ -- Stream Global Services, Inc., (AMEX:OOO), premium provider of customer care and business process outsourcing (BPO) services for Fortune 1000 companies, ("Stream"), today reported consolidated financial results for its 2009 second quarter.

GAAP Consolidated Results

On July 31, 2008, Stream (formerly known as Global BPO Services Corp.), a development stage company, completed its acquisition of Stream Holdings Corporation ("SHC").(1)

On a GAAP basis, revenue for the three and six months ended June 30, 2009 was $125.7 million and $261.3 million, as compared to zero in the three and six months ended June 30, 2008.

GAAP net loss was $2.6 million and $0.9 million for the three and six months ended June 30, 2009, as compared GAAP net income of $0.7 million and $1.9 million for the three and six months ended June 30, 2008.

Pro Forma Combined Consolidated Results

On a pro forma combined consolidated basis, the Company posted revenue for the three and six months ended June 30, 2009 of $125.7 million and $261.3 million, as compared to $128.7 million and $269.1 million in the three and six months ended June 30, 2008.  Revenue for the three and six months ended June 30, 2008 included approximately $8 million and $23 million, respectively from customers that were lost prior to the acquisition of SHC.

Stream's gross profit as a percentage of revenue increased to 42% in the three and six months ended June 30, 2009, compared to 35% in the three and six months ended June 30, 2008.

For the three and six months ended June 30, 2009, adjusted pro forma earnings before interest taxes depreciation and amortization ("EBITDA") increased 74% and 101% to $10.5 million and $26.4 million compared to $6.0 million and $13.1 million in the year-earlier period.  Adjusted EBITDA as a percentage of revenue for the three and six months ended June 30, 2009 was 8.4% and 10.1%, compared to 4.7% and 4.9% for the three and six months ended June 30, 2008.

2009 Accomplishments

"Since acquiring Stream in July of 2008, we have achieved many significant milestones," commented Scott Murray, Chairman and Chief Executive Officer of Stream.  "We built an industry-leading management team, expert in delivering value-driven services for our clients.  We expanded our global presence to regions such as El Salvador, Tunis, Egypt and the Philippines.  And, we have been successful in attracting a number of new clients, most of which came on board during the second quarter of the year.  As a result, we experienced start-up costs associated with this new business, relative to initiatives such as training, to ensure the quality necessary for the successful launch of new client services.  In addition, we experienced start-up costs for the new solution centers opened in the second quarter - Philippines and Tunis - all of which were expensed in our income statement."  Murray concluded, "During the remainder of 2009, we expect to continue to expand our presence in the Philippines, Latin America and Asia in order to provide a global one-stop service platform that allows Stream to provide premier services to help our clients achieve their goals."

For further information please contact: Karen Falcone, Vice President of Marketing at 781-304-1800 or .

1.  On July 31, 2008, Stream Global Services, Inc. ("SGSI") (formerly known as Global BPO Services Corp.) completed its acquisition of Stream Holdings Corporation ("SHC"). These financial results also include non-GAAP pro forma combined results of operations for SGSI and SHC as if they had been combined since January 1, 2008.  The pro forma combined consolidated condensed statements of operations are presented because management believes they reflect Stream's ongoing business in a manner that allows meaningful period-to-period comparisons. Prior to July 31, 2008, SGSI was a blank check company formed for the purpose of seeking to acquire an operating company. Accordingly, we had no revenues prior to July 31, 2008 because we were in the development stage.

About Stream Global Services, Inc.

Stream Global Services is a premium provider of customer care and business process outsourcing (BPO) services for the brand-driven Fortune 1000. A global firm, with approximately 16,000 employees based out of 35 service centers in 20 countries, Stream is a trusted advisor to some of the largest technology, retail, entertainment/media, telecommunications and related companies in the world. Its service programs, including technical support, customer retention and revenue generation, are delivered through a set of standardized best practices by a highly skilled workforce. Stream continues to expand its global presence and service offerings to increase brand loyalty, revenue and business performance for organizations across the globe. To learn more about the company and its complete service offering, please visit http://www.stream.com/.

Safe Harbor

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including forward-looking statements regarding our business expectations and objectives. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including, without limitation, risks relating to our ability to maintain and win additional client business, continue to maintain our operating performance and margin expansion, continue to have sufficient capital to grow and maintain our business, retain our management team and effectively operate a global franchise across multiple jurisdictions plus other risks detailed in our filings with the SEC, including those discussed in the Company's Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2008 and our Form 10-Q for the three months ended March 31, 2009.

Stream does not intend, and disclaims any obligation, to update any forward-looking information contained in this release, even if its estimates change.

The required reconciliations and other disclosures for all non-GAAP measures used by the Company are set forth in a schedule attached to this press release and in the Current Report on Form 8-K furnished to the SEC on the date hereof.

References to the financial information included in this news release reflect rounded numbers and should be considered approximate values.

Non-GAAP Financial Information. This release contains non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of Stream's performance or liquidity, should be considered in addition to, not as a substitute for, measures of Stream's financial performance or liquidity prepared in accordance with GAAP. Non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how SGSI defines non-GAAP financial measures in this release.

Where specified in the accompanying schedules for various periods entitled "Reconciliation of GAAP to Non-GAAP Information," certain items noted on each such specific schedule are excluded from the non-GAAP financial measures.

Stream's management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of Stream's comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes certain items from its internal financial statements for purposes of its internal budgets and financial goals. These non-GAAP financial measures are used by Stream's management in their financial and operating decision-making because management believes they reflect Stream's ongoing business in a manner that allows meaningful period-to-period comparisons. Stream's management believes that these non-GAAP financial measures provide useful information to investors and others in (a) understanding and evaluating Stream's current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner Stream's current financial results with its past financial results.

All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude certain items do not include all items of income and expense that affect Stream's operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on Stream. Management compensates for these limitations by also considering Stream's financial results in accordance with GAAP.

                      STREAM GLOBAL SERVICES, INC.
             CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                    (in thousands, except per share data)
                               (unaudited)

                              Three Months Ended      Six Months Ended
                                   June 30,                June 30,
                              ------------------      ----------------
                               2009       2008         2009       2008
                               ----       ----         ----       ----

    Revenue                  $125,670      $-        $261,284      $-
    Direct cost of
     revenue                   73,405       -         152,019       -
                               ------     ---         -------     ---
    Gross profit               52,265       -         109,265       -
                               ------     ---         -------     ---
    Operating expenses:
      Selling, general and
       administrative
       expenses                42,217     282          85,718     545
      Depreciation expense      4,579       5           8,765       9
      Amortization expense      2,333       -           4,812       -
                                -----     ---          ------     ---
    Income (loss) from
     operations                 3,136    (287)          9,970    (554)
    Interest expense
     (income) and other
     financial costs            3,459  (1,347)          5,509  (3,486)
                                -----  ------           -----  ------
    Income (loss) before
     provision for income
     taxes                       (323)  1,060           4,461   2,932
    Provision for income
     taxes                      2,242     400           5,328   1,070
                                -----     ---           -----   -----
    Net income (loss)         $(2,565)   $660           $(867) $1,862
    Preferred stock
     beneficial conversion
     feature, accretion
     and dividends              2,161     258           3,679     288
                                -----     ---           -----     ---

    Net income (loss)
     available to common
     shareholders:             (4,726)    402          (4,546)  1,574
                               ======     ===          ======   =====
    Basic and Diluted income
     (loss) per share          $(0.50)  $0.01          $(0.48)  $0.05
                               ======   =====          ======   =====
    Shares used in
     computing per share
     data:
    Basic and Diluted
     shares                     9,449  29,688           9,452  29,688


  Note: Prior to July 31, 2008 SGS was a development stage company and had
  no operations.



                                    STREAM GLOBAL SERVICES, INC.
                                CONSOLIDATED CONDENSED BALANCE SHEETS
                                              (unaudited)
                                             (in thousands)

                                   June 30,                   December 31,
                                     2009                        2008
                                     ----                        ----
  Assets
  Current assets:
  Cash and cash equivalents        $14,189                     $10,660
  Accounts receivable, net         106,141                     109,385
  Other current assets              26,869                      26,811
                                    ------                      ------
  Total current assets             147,199                     146,856
  Equipment and fixtures, net       49,577                      41,634
  Goodwill, intangible assets,
   and other long-term assets      141,032                     141,455
                                   -------                     -------
  Total assets                    $337,808                    $329,945
                                  ========                    ========

  Liabilities and Stockholders'
   Equity
  Current liabilities              $74,242                     $79,392
  Long-term debt                    72,929                      63,624
  Capital lease obligations         10,184                       5,484
  Deferred income taxes             19,237                      17,396
  Other long-term liabilities       14,643                      16,387
                                    ------                      ------
  Total liabilities                191,235                     182,283

  Stockholders' equity and
   preferred stock *               146,573                     147,662
                                   -------                     -------
  Total liabilities and
   stockholders' equity           $337,808                    $329,945
                                  ========                    ========

  * June 30, 2009 and December 31, 2008 includes $712 and $145,911 of
  redeemable convertible preferred stock, respectively.



                         STREAM GLOBAL SERVICES, INC.
      PRO FORMA COMBINED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                               (unaudited)
                              (in thousands)

                            Three Months Ended          Six Months Ended
                                 June 30,                   June 30,
                            ------------------          ----------------
                             2009         2008         2009         2008
                             ----         ----         ----         ----
  (Non-GAAP Pro forma)
  Revenue                  $125,670     $128,714     $261,284     $269,086
  Direct costs of revenue    73,346       83,270      150,777      174,404
                             ------       ------      -------      -------
  Gross profit               52,324       45,444      110,507       94,682
                             ------       ------      -------       ------
  Gross profit as a
   percentage of revenue         42%          35%          42%          35%

  Operating expenses:
    Selling, general and
     administrative
     expenses                42,073       39,403       84,887       81,539
    Stock-based compensation
      expense                   120          145          324          290
    Depreciation expense      4,579        4,309        8,765        8,404
    Amortization expense      2,333        1,438        4,812        2,877
                              -----        -----        -----        -----
                             49,105       45,295       98,788       93,110
                             ------       ------       ------       ------

  Income (loss) from
   operations                 3,219          149       11,719        1,572
  Interest expense (income)
   and other financial costs  3,542        4,198        7,258        5,417
                              -----        -----        -----        -----
  Income (loss) before
   provision for income
   taxes                       (323)      (4,049)       4,461       (3,845)
  Provision for income
   taxes                      2,242        2,806        5,328        5,738
                              -----        -----        -----        -----
  Net income (loss)         $(2,565)     $(6,855)       $(867)     $(9,583)
                             ======       ======         ====       ======

  Adjusted EBITDA
  Income (loss) from
   operations                $3,219         $149      $11,719       $1,572
  Depreciation and
   amortization expense       6,912        5,747       13,577       11,281
  Restructuring severance
   expense                      248            -          735            -
  Stock-based compensation
   expense                      120          145          324          290
                            -------       ------      -------      -------
  Adjusted EBITDA           $10,499       $6,041      $26,355      $13,143
                            =======       ======      =======      =======



                       STREAM GLOBAL SERVICES, INC.
         RECONCILIATION OF GAAP TO NON-GAAP PRO FORMA INFORMATION
                               (unaudited)
                              (in thousands)

                                  Three Months Ended   Six Months Ended
                                       June 30,            June 30,
                                  ------------------   ----------------
                                    2009      2008      2009      2008
                                    ----      ----      ----      ----

    Net Income (loss)             $(2,565)    $660     $(867)   $1,862
    Add (deduct) items to
     reconcile to non-GAAP
     adjusted EBITDA:
    Provision for income taxes      2,242      400     5,328     1,070
    Pro forma depreciation and
     amortization                   6,912    5,747    13,577    11,281
    Interest expense (income)
     and financial costs            3,459   (1,347)    5,509    (3,486)
    Realized foreign exchange
     gains                             83      446     1,749       132
    Restructuring severance           248        -       735         -
    Stock-based compensation
     expenses                         120      145       324       290
    Operating income (loss) from
     SHC for the period prior to
     the acquisition of July 31,
     2008, excluding depreciation
     and amortization                   -      (10)        -     1,994
                                      ---      ---       ---     -----
    Pro Forma EBITDA              $10,499   $6,041   $26,355   $13,143
                                  =======   ======   =======   =======


    Direct cost of revenue        $73,405  $83,587  $152,019  $174,498
    Add (deduct) items to
     reconcile to non-GAAP
     adjusted EBITDA:
    Foreign exchange gains            (59)    (317)   (1,242)      (94)
                                      ---     ----    ------       ---
    Adjusted direct cost
     of revenue                   $73,346  $83,270  $150,777  $174,404
                                  =======  =======  ========  ========

    Gross profit                  $52,265  $45,127  $109,265   $94,588
    Add (deduct) items to
     reconcile to non-GAAP
     adjusted EBITDA:
    Foreign exchange gains             59      317     1,242        94
                                      ---      ---     -----       ---
    Adjusted gross profit         $52,324  $45,444  $110,507   $94,682
                                  =======  =======  ========   =======

    Selling, general and
     administrative expenses      $42,217  $39,677   $85,718   $81,867
    Add (deduct) items to
     reconcile to non-GAAP
     adjusted EBITDA:
    Stock-based compensation         (120)    (145)     (324)     (290)
    Foreign exchange gains            (24)    (129)     (507)      (38)
                                      ---     ----      ----       ---
    Selling, general and
     administrative expenses      $42,073  $39,403   $84,887   $81,539
                                  =======  =======   =======   =======

    Income (loss) from
     operations                    $3,136    $(297)   $9,970    $1,440
    Add (deduct) items to
     reconcile to non-GAAP
     adjusted EBITDA:
    Foreign exchange gains             83      446     1,749       132
                                      ---      ---     -----       ---
    Income (loss) from
     operations                    $3,219     $149   $11,719    $1,572
                                   ======     ====   =======    ======

    Interest expense (income)
     and other financial costs     $3,459   $3,752    $5,509    $5,285
    Add (deduct) items to
     reconcile to non-GAAP
     adjusted EBITDA:
    Foreign exchange gains             83      446     1,749       132
                                      ---      ---     -----       ---
    Interest expense (income)
     and other financial costs     $3,542   $4,198    $7,258    $5,417
                                   ======   ======    ======    ======



                          STREAM GLOBAL SERVICES, INC.
         STATEMENT OF OUTSTANDING COMMON STOCK EQUIVALENTS AND WARRANTS
                              AS OF JUNE 30, 2009
                                  (unaudited)
                                 (in thousands)

                                            Shares or warrants
                                               outstanding       Percentage
                                            ------------------   ----------
  Common share equivalents outstanding:

  Common shares held by founding
   stockholders subject to
   resale restrictions                            7,813             22.08%
  Common shares held by employees subject to
   resale restriction                                69              0.19%

  Common shares held by institutional investor    1,250              3.53%

  Common shares held by other public investors      314              0.89%
                                                  -----              -----
  Common shares outstanding                       9,446             26.69%

  Common share equivalents from conversion
   of 151 preferred shares held by Ares at
   $6.00 per share conversion price              25,945             73.31%
                                                 ------             -----
  Total common share equivalents outstanding     35,391            100.00%
                                                 ======            ======

  Warrants and employee stock options outstanding:
  Publicly held warrants outstanding,
   exercisable at $6.00 per warrant into
   common shares expiring in 2011                20,522

  Ares held warrants outstanding, exercisable
   at $6.00 per warrant into common shares
   expiring in 2018                               7,500

  Employee stock options, exercisable at
   $6.00 per share and not yet vested             3,133


DATASOURCE: Stream Global Services, Inc.



CONTACT:  Karen Falcone, Vice President of Marketing of Stream Global

Services, Inc., [phone], 



Web Site:  http://www.stream.com/ 

Copyright