Stream Global Services Announces Financial Results For Third Quarter Ended September 30, 2011

Stream Global Services, Inc., (NYSE AMEX: SGS), a leading global business process outsource (BPO) service provider specializing in customer relationship management including technical support and sales programs for Fortune 1000 companies, today announced consolidated financial results for the three and nine months ended September 30, 2011. On November 2, 2011 Stream also filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission for the quarter ended September 30, 2011.

CEO Commentary

Kathryn Marinello, Chairman and Chief Executive Officer of Stream, said, “We are pleased to report our fourth consecutive quarter of increased revenue and Adjusted EBITDA when compared to the same quarter in the prior year. We continue to see strong demand for our services as demonstrated by the 6% growth in year-over-year revenue for the quarter. As a result of our belief in continued customer demand for our services, this quarter we invested approximately $17 million to build out our facilities and enhance our infrastructure. Our efforts to improve our operational performance by optimizing our cost structure and motivating and rewarding our employees are again yielding results as this quarter we realized positive Income From Operations versus Losses from Operations in prior periods.”

Third Quarter 2011 Financial Highlights

• Revenue for the quarter ended September 30, 2011 was $208 million, an increase of $11 million, or 6%, from the same period last year. The growth in revenue was due to a combination of new clients won in 2010 and 2011, expansion with existing clients and approximately $5 million due to fluctuations in currency exchange rates. During the first nine months of 2011, Stream has signed an estimated $136 million, on an annualized basis once fully ramped, of revenue with both new and existing clients.
• Gross profit increased approximately $2 million, or 2%, over the prior year third quarter. The Gross Profit percentage was 41% for 2011 and 42% for 2010 as a result of incurring approximately $4 million more than the prior period in unpaid training costs related to the launch of new programs. We also incurred approximately $1 million for an agent bonus program in the third quarter 2011, which was not in effect the third quarter 2010.
• Income From Operations Excluding Severance, restructuring and other charges, net for the quarter ended September 30, 2011 was $3 million versus $1 million for the same period in 2010. The improvement reflects higher gross profit earned on the increased revenue and a relative decline in Selling, General and Administrative expenses from 33.5% of revenue for the third quarter 2010 to 31.8% of revenue for the third quarter of 2011. This improvement is largely the result of our profit improvement programs in 2011. For the first nine-months of 2011, Income (Loss) From Operations Excluding Severance, restructuring and other charges was income of $10 million, an increase of $17 million from the comparable loss of $7 million in the prior year period.
• Net loss was $10 million and $28 million for the three and nine months ended September 30, 2011 versus a net loss of $13 million and $45 million for the same periods in 2010.
• Cash flow from operating activities for the third quarter 2011 was $5 million, a decrease of $5 million from the prior year period largely due to severance payments of $4 million made in the quarter. Days Sales Outstanding improved from 78 days at September 30, 2010 to 69 days at September 30, 2011.
• Free Cash Flow (operating cash flow less additions to equipment and fixtures and new capital lease financing) for the third quarter was outflows of $12 million and for the nine months ended September 30, 2011 was inflows of $12 million. The third quarter’s Free Cash Flow reflects an increase in capital expenditures to expand capacity and payment of severance costs.
• Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was $20 million for the third quarter of 2011, an increase of $1 million from the third quarter of 2010 ($19 million.) On a year-over-year constant currency basis, our Adjusted EBITDA would have been higher by approximately $1 million had there been no change in global currency rates.

Americas Region

Revenue generated from our Americas region, which includes the United States, Canada, the Philippines, India, Costa Rica, Nicaragua, the Dominican Republic, El Salvador and China, was $149 million and $449 million for the three and nine months ended September 30, 2011 ($146 million and $425 million for the same periods in the prior year, respectively).

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