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2018

ANNUAL REPORT

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 primarily to Global 2000 companies and their end customers principally in the financial services, communications, technology, transportation & leisure and healthcare industries. SYKES' differentiated full lifecycle management services platform effectively engages customers at every touchpoint within the customer journey, including digital marketing and acquisition, sales expertise, customer service, technical support and retention, many of which can be optimized by a suite of robotic process automation ("RPA") and artificial intelligence ("AI") solutions. 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 its 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. Additionally, through the acquisition of RPA provider Symphony Ventures Ltd ("Symphony") coupled with its investment in AI through XSell Technologies, Inc. ("XSell"), the Company also provides a suite of solutions such as consulting, implementation, hosting and managed services that optimizes its differentiated full lifecycle management services platform. SYKES' 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 .

FELLOW SHAREHOLDERS,

In the concluding section of our 2017 shareholder letter, we declared that all of our action plans in 2018 were geared toward putting our U.S. operations on a stable footing. We are pleased to report that those action plans started to pay off as we exited 2018, and we expect to build on that success further in 2019. Our objective in 2018 was to eliminate excess capacity in the U.S. This is important because the U.S., which is material in scope, has been the key culprit behind our overall tepid financial performance for reasons which we will discuss later. On balance, we achieved most of that goal. The proof of success was in the margin expansion we saw as we exited the year. We will discuss the highlights of our activity in 2018 in more detail later. We will also address how we plan to build on those key points in 2019.

CHARLES E. SYKES President and CEO

Another step forward in 2018 involved future-proofing our business.

We put our strong balance sheet to work to acquire Symphony Ventures Limited ("Symphony"), an industry-leading robotic process

JOHN CHAPMAN Executive VP and CFO

automation (RPA) firm. At the same time, we continued to strengthen our digital marketing platform

with the acquisition of WhistleOut. We will discuss the rationale behind both of these highly strategic

transactions in greater detail as the letter unfolds.

In all, while 2018 was ultimately a productive year, it came with continued challenges in recruitment and retention, and some weakness in the communications vertical. We have efforts underway to address these challenges. In conjunction with that, we plan to pursue incremental opportunities for capacity rationalization as well as cost alignment that present themselves. And finally, we continue to advance the on going execution of our revenue growth strategies, which will be key to further margin expansion in 2019.

TAKING IMPORTANT STEPS IN 2018 TOWARD FUTURE OPERATING MARGIN EXPANSION

As we entered 2018, our main focus was to address the 200 basis points of overhang that was negatively impacting our consolidated operating margins. As we have discussed, we believe that our business can perform in the 8% to 10% operating margin range in its current form. However, at the start of 2018, our implied non-GAAP operating margin projections for 2018 were roughly between 6.5% and 7.0%. We closed the year with a 6.8% non-GAAP* operating margin (or 3.9% GAAP operating margins)

SYKES ANNUAL REPORT 2018 | 1

on a revenue base of $1.6 billion, which grew 1.9%** on a constant currency (or 2.5% on a reported basis) basis relative to 2017.

What was weighing on our margins in part dates back to the latter part of 2015 and all of 2016 when we began adding new capacity and fine-tuning existing capacity in the U.S. in response to significant business wins with domestic clients in the communications and financial services verticals. Around that time, the U.S. unemployment rate remained relatively manageable, averaging around 5.3% and 4.9% for all of 2015 and 2016, respectively. However, just as we began to ramp for those wins in late 2016 and the rest of 2017, labor markets in the U.S. got significantly tighter. In fact, the national unemployment rate in the U.S. in 2017 declined sharply, averaging 4.4%. As 2018 was winding down, that rate had dipped to 3.7%, the lowest levels in almost 50 years. Furthermore, some local job and metro markets saw unemployment levels dropping down to 2%. This tightening labor backdrop fueled rising wages, which gained further momentum with the passage of the Tax Cuts and Jobs Act in December 2017. In fact, soon after the passage of the tax cuts, various Fortune 1000 companies publicly announced new entry-level wages of around $12 to $15 an hour in the U.S., creating further competition for the labor cohort we target. This led to operating margins pressure in three ways: First, competition for labor led to higher agent turnover, which in turn led to increased recruitment costs. Second, the decision to raise wages to prevailing market levels to stem turnover in certain job markets, along with the contractual lag in passing price increases on to clients, also pressured margins. And third, in states where an inelastic labor supply as well as the factors discussed previously were at play, large swaths of capacity were left stranded, additionally pressuring operating margins.

Compounding the margin drag even further was demand weakness in the communications vertical, which intensified in part because of the lower-than-expected uptake of new high-end smartphone models. We attribute this weak demand to a lack of sweeping advances, along with limited promotional activity among wireless carriers which generally drives churn. We believe this will likely change as wireless carriers and media companies merge or form strategic partnerships

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to drive differentiation, not to mention the impact of the rollout of 5G, the next generation of internet connectivity network, and continued improvement in self-help tools.

Our plan to tackle the operating margin drag involved a multipronged approach. We transferred as much of the U.S. demand as possible to better-utilized brick-and-mortar facilities with more favorable wage-labor dynamics. We also shifted demand to our at-home agent platform, or to our international delivery locations. We then rationalized the resulting excess capacity. Finally, we negotiated price concessions with clients where feasible. All these approaches were employed to various extents and with variable success, freeing up significant capacity. From the first quarter of 2018 to the end of 2018, we rationalized close to 5,000 seats, or roughly 10% of our total capacity. And even though we had to discontinue a client program in the financial services vertical as part of the capacity rationalization, which created further revenue headwind of around 1% to our 2018 revenue growth, we made inroads overall. We clawed back roughly 100 basis points of the 200 in margin improvement as we exited the fourth quarter of 2018.

FUTURE-PROOFING THROUGH STRATEGIC INVESTMENTS

In conjunction with accomplishing a major milestone around capacity rationalization, we were able to leverage our strong financial position to further future-proof our business model. As part of that

strategy, we made a couple of carefully calculated acquisitions in 2018 that capitalize on both micro and macro trends. At a micro level, one of the acquisitions is a play on the secular shift toward digital commerce as more and more transactions across product categories, and not just those that are brand-specific, are initiated and researched online. The acquisition helps us capitalize on that continuing shift to digital and the related convergence around marketing, sales and service, which is the centerpiece of our full life cycle value proposition. Moreover, the acquisition also reflects an important tenet in the evolution of our mission statement of helping consumers find and use products and services they need. At the macro level, our other 2018 acquisition opens up a whole new addressable market of automation. This is oriented around labor productivity and wage inflation trends near-term and changing demographic trends long-term. As clients seek greater

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