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Startek Reports Quarterly Financial Results
[August 07, 2019]

Startek Reports Quarterly Financial Results


Startek, Inc. (NYSE:SRT), a global provider of customer experience management solutions, is reporting financial results for the quarter ended June 30, 2019.

Financial Results

The results presented for the quarter ended June 30, 2019 and March 31, 2019 include both Startek and Aegis financial results. As a result of the reverse acquisition accounting for the Startek and Aegis business combination on July 20, 2018, the results presented for the quarter ended June 30, 2018 include only Aegis financial results.

Total revenue for the quarter was $160.6 million compared to $161.1 million in the quarter ended March 31, 2019, and was up 45% compared to $110.2 million in the quarter ended June 30, 2018.

Gross profit for the quarter increased to $27.6 million compared to $27.2 million in the quarter ended March 31, 2019, and was up 63% compared to $16.9 million in the quarter ended June 30, 2018.

Gross margin increased 30 basis points to 17.2% during the quarter compared to 16.9% in the quarter ended March 31, 2019, and increased 190 basis points compared to 15.3% in the quarter ended June 30, 2018.

Selling, general and administrative (SG&A) expenses were $24.9 million compared to $24.1 million in the quarter ended March 31, 2019, and $15.3 million in the year-ago quarter. As a percentage of revenue, SG&A was 15.5% compared to 14.9% in the quarter ended March 31, 2019 and 13.8% in the year-ago quarter.

Net loss attributable to Startek shareholders for the quarter was $3.6 million or $(0.10) per share, compared to a net loss of $3.3 million or $(0.09) per share in the quarter ended March 31, 2019, and a net loss of $3.7 million or $(0.18) per share in the year-ago quarter.

Adjusted EBITDA* for the quarter increased to $11.0 million compared to $10.9 million in the quarter ended March 31, 2019. Adjusted EBITDA for the year-ago quarter was $6.4 million.

*A non-GAAP measure defined below.

Management Commentary

"We generated better than expected results during the second quarter as we continued to drive growth within our current client base, while ramping several new clients across multiple geographies," said Lance Rosenzweig, president & global CEO of Startek. "We also maintained our track record of expanding gross margins every quarter since the business combination with Aegis in July 2018. The second quarter was especially impressive given the seasonality in our business, which typically calls for a sequential step back from Q1.

"Further, at the end of the quarter, Startek was added to the Russell 2000® Index as part of the Russell Indexes' annual reconstitution, which we expect to provide increased awareness to the broader investment community going forward.

"As I reflect on the completion of our first year as a combined company with Aegis, I am very proud of the work our team has accomplished to integrate the businesses and drive both cost and revenue synergies. We have executed on our client diversification strategy by consistently targeting high-growth verticals, while implementing a new client-centric management model that has been very well-received by our clients. Today, Startek is positioned as a premium provider in customer experience management.

"Subsequent to the quarter, we announced an exciting new addition to our global leadership team as we appointed Rajiv Ahuja to Global Chief Operating Officer. Rajiv is a proven leader with decades of experience in delivering best-in-class customer solutions for some of the largest and most recognizable companies in the world, and we look forward to leveraging his insights as we continue to instill a tech-enabled and collaborative culture at Startek."

Conference Call and Webcast Details

Startek management will hold a conference call today at 5:00 p.m. Eastern time to discuss its quarterly financial results. The conference call will be followed by a question and answer period.

Date: Wednesday, August 7, 2019
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: (844) 239-5283
International dial-in number: (574) 990-1022
Conference ID: 2647069

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will also be broadcast live and available for replay here.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through August 14, 2019.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 2647069

About Startek

Startek is a leading global provider of business process outsourcing solutions. The company provides customer experience management, back office and technology services to corporations around the world across a range of industries. Operating under the Startek and Aegis brands, the company has more than 45,000 outsourcing experts across 54 delivery campuses worldwide that are committed to enhancing the customer experience for clients. Services include omnichannel customer care, customer acquisition, order processing, technical support, receivables management and analytics through automation, voice, chat, email, social media and IVR, resulting in superior business results for its clients. To learn more about Startek's global solutions, please visit www.startek.com.

Forward-Looking Statements

The matters regarding the future discussed in this news release include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are intended to be identified in this document by the words "anticipate," "believe," "estimate," "expect," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should" and similar expressions. As described below, such statements are subject to a number of risks and uncertainties that could cause Startek's actual results to differ materially from those expressed or implied by any such forward-looking statements. Readers are encouraged to review risk factors and all other disclosures appearing in the Company's Form 10-KT for the fiscal year ended December 31, 2018, as filed with the SEC on March 14, 2019, as well as other filings with the SEC, for further information on risks and uncertainties that could affect Startek's business, financial condition and results of operation. Copies of these filings are available from the Securities and Exchange Commission, the Company's website or the Company's investor relations department. Startek assumes no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date herein.





STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenue

 

$

161,283

 

 

$

110,223

 

 

$

322,425

 

 

$

225,318

 

Warrant contra revenue

 

$

(730

)

 

$

-

 

 

$

(730

)

 

$

-

 

Net Revenue

 

$

160,553

 

 

$

110,223

 

 

$

321,695

 

 

$

225,318

 

Cost of services

 

 

132,993

 

 

 

93,340

 

 

 

266,921

 

 

 

187,278

 

Gross profit

 

 

27,560

 

 

 

16,883

 

 

 

54,774

 

 

 

38,040

 

Selling, general and administrative expenses

 

 

24,936

 

 

 

15,257

 

 

 

49,015

 

 

 

29,663

 

Restructuring and other merger related cost

 

 

746

 

 

 

-

 

 

 

1,839

 

 

 

6,257

 

Operating income

 

 

1,878

 

 

 

1,626

 

 

 

3,920

 

 

 

2,120

 

Share of profit of associates

 

 

662

 

 

 

(25

)

 

 

1,003

 

 

 

39

 

Interest expense, net

 

 

(4,026

)

 

 

(3,273

)

 

 

(8,492

)

 

 

(7,402

)

Exchange gain / (losses), net

 

 

14

 

 

 

(1,868

)

 

 

(677

)

 

 

(3,146

)

Loss before income taxes

 

 

(1,472

)

 

 

(3,540

)

 

 

(4,246

)

 

 

(8,389

)

Income tax expense

 

 

730

 

 

 

234

 

 

 

1,113

 

 

 

565

 

Net loss

 

$

(2,202

)

 

$

(3,774

)

 

$

(5,359

)

 

$

(8,954

)

Net income/(loss) attributable to non-controlling interests

 

 

1,392

 

 

 

(66

)

 

 

1,581

 

 

 

906

 

Net loss attributable to Startek shareholders

 

 

(3,594

)

 

 

(3,708

)

 

 

(6,940

)

 

 

(9,860

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

32

 

 

 

(2,518

)

 

 

599

 

 

 

(3,185

)

Change in fair value of derivative instruments

 

 

413

 

 

 

-

 

 

 

348

 

 

 

-

 

Pension amortization

 

 

(236

)

 

 

(483

)

 

 

(60

)

 

 

(780

)

Comprehensive loss

 

$

(1,993

)

 

$

(6,775

)

 

$

(4,472

)

 

$

(12,919

)

Comprehensive income attributable to non-controlling interests

 

 

1,281

 

 

 

(284

)

 

 

1,556

 

 

 

549

 

Comprehensive loss attributable to Startek shareholders

 

 

(3,274

)

 

 

(6,491

)

 

 

(6,028

)

 

 

(13,468

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$

(0.10

)

 

$

(0.18

)

 

$

(0.18

)

 

$

(0.48

)

Weighted average common shares outstanding - basic and diluted

 

 

37,779

 

 

 

20,600

 

 

 

37,779

 

 

 

20,600

 


STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

As of June 30,

 

As of December 31,

 

 

2019

 

2018

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,452

 

 

$

16,617

 

Restricted cash

 

 

10,456

 

 

 

7,952

 

Trade accounts receivable, net

 

 

107,646

 

 

 

107,836

 

Unbilled Revenue

 

 

49,265

 

 

 

42,135

 

Prepaid and other current assets

 

 

17,567

 

 

 

18,850

 

Total current assets

 

$

200,386

 

 

$

193,390

 

Property, plant and equipment, net

 

 

39,638

 

 

 

42,242

 

Operating lease Right-of-use assets

 

 

72,079

 

 

 

-

 

Intangible assets, net

 

 

116,026

 

 

 

121,336

 

Goodwill

 

 

226,505

 

 

 

225,450

 

Investment in associates

 

 

1,767

 

 

 

2,097

 

Deferred tax assets, net

 

 

6,116

 

 

 

5,048

 

Prepaid expenses and other non-current assets

 

 

18,153

 

 

 

15,076

 

Total assets

 

$

680,670

 

 

$

604,639

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Trade accounts payable

 

$

24,810

 

 

$

26,886

 

Accrued expenses and other current liabilities

 

 

77,621

 

 

 

84,881

 

Short term debt

 

 

28,295

 

 

 

21,975

 

Current maturity of long term debt

 

 

14,000

 

 

 

9,800

 

Current maturity of operating lease liabilities

 

 

22,000

 

 

 

-

 

Current maturity of finance lease obligations

 

 

1,074

 

 

 

1,816

 

Total current liabilities

 

$

167,800

 

 

$

145,358

 

Long term debt

 

 

148,726

 

 

 

152,100

 

Operating lease liabilities

 

 

51,400

 

 

 

-

 

Other non-current liabilities

 

 

14,279

 

 

 

11,907

 

Deferred tax liabilities, net

 

 

18,586

 

 

 

18,901

 

Total liabilities

 

$

400,791

 

 

$

328,266

 

Commitments and contingencies

 

 

-

 

 

 

-

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 38,452,111 and 37,446,323 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

$

384

 

 

$

374

 

Additional paid-in capital

 

 

275,284

 

 

 

267,317

 

Accumulated other comprehensive loss

 

 

(4,634

)

 

 

(5,547

)

Accumulated deficit

 

 

(38,067

)

 

 

(31,127

)

Equity attributable to Startek shareholders

 

$

232,967

 

 

$

231,017

 

Non-controlling interest

 

 

46,912

 

 

 

45,356

 

Total stockholders' equity

 

$

279,879

 

 

$

276,373

 

Total liabilities and stockholders' equity

 

$

680,670

 

 

$

604,639

 

 

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2019

 

2018

Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(5,359

)

 

$

(8,954

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

14,631

 

 

 

10,749

 

Profit on sale of property, plant and equipment

 

 

(223

)

 

 

-

 

Provision for doubtful accounts

 

 

1,169

 

 

 

412

 

Warrant contra revenue

 

 

730

 

 

 

-

 

Share-based compensation expense

 

 

781

 

 

 

-

 

Deferred income taxes

 

 

(1,224

)

 

 

(1,203

)

Share of profit of affiliates

 

 

(1,003

)

 

 

(39

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(1,218

)

 

 

2,934

 

Prepaid expenses and other assets

 

 

(7,677

)

 

 

17,303

 

Accounts payable

 

 

(2,091

)

 

 

(1,565

)

Income taxes, net

 

 

(2,663

)

 

 

(1,508

)

Accrued and other liabilities

 

 

(1,280

)

 

 

(14,985

)

Net cash (used in) provided by operating activities

 

$

(5,427

)

 

$

3,144

 

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(7,302

)

 

 

(2,353

)

Distributions received from associates

 

 

1,329

 

 

 

18

 

Net cash used in investing activities

 

$

(5,973

)

 

$

(2,335

)

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from the issuance of common stock

 

 

6,466

 

 

 

-

 

Payments on long term debt

 

 

(4,200

)

 

 

(1,400

)

Proceeds from (payments on) other debt, net

 

 

10,513

 

 

 

(3,290

)

Net cash provided by (used in) financing activities

 

$

12,779

 

 

$

(4,690

)

Net increase (decrease) in cash and cash equivalents

 

 

1,379

 

 

 

(3,881

)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

 

 

(40

)

 

 

(27

)

Cash and cash equivalents and restricted cash at beginning of period

 

 

24,569

 

 

 

21,601

 

Cash and cash equivalents and restricted cash at end of period

 

$

25,908

 

 

$

17,693

 

 

 

 

 

 

 

 

 

 

Components of cash and cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Balances with banks

 

 

15,452

 

 

 

10,986

 

Restricted cash

 

 

10,456

 

 

 

6,707

 

Total cash and cash equivalents and restricted cash

 

$

25,908

 

 

$

17,693

 

STARTEK, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(In thousands)
(Unaudited)

This press release contains references to the non-GAAP financial measure of Adjusted EBITDA. Reconciliation of this non-GAAP measure to its comparable GAAP measure is included below. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with GAAP. It is provided solely to assist in an investor's understanding of these items on the comparability of the Company's operations.

Adjusted EBITDA:

The Company defines non-GAAP Adjusted EBITDA as Net loss plus Income tax expense, Interest and other expense, net, Depreciation and amortization expense, Restructuring and other merger related cost, Share-based compensation expense and Warrant contra revenue (if applicable). Management uses Adjusted EBITDA as a performance measure to analyze the performance of our business. Management believes that excluding these non-cash and other non-recurring items permits a more meaningful comparison and understanding of our strength and performance of our ongoing operations for our investors and analysts.

Adjusted EBITDA:

 

 

 

Three Months Ended June

 

Six Months Ended June

 

 

 

2019

 

2018

 

2019

 

2018

Net Loss

 

 

(2,202

)

 

 

(3,774

)

 

 

(5,359

)

 

 

(8,954

)

Income tax expense

 

 

730

 

 

 

234

 

 

 

1,113

 

 

 

565

 

Interest and other expense, net

 

 

3,350

 

 

 

5,166

 

 

 

8,166

 

 

 

10,509

 

Depreciation and amortization expense

 

 

7,328

 

 

 

4,724

 

 

 

14,631

 

 

 

10,749

 

Restructuring and other merger related cost

 

 

746

 

 

 

-

 

 

 

1,839

 

 

 

6,257

 

Share-based compensation expense

 

 

356

 

 

 

-

 

 

 

781

 

 

 

-

 

Warrant contra revenue

 

 

730

 

 

 

-

 

 

 

730

 

 

 

-

 

Adjusted EBITDA

 

$

11,038

 

 

$

6,350

 

 

$

21,901

 

 

$

19,126

 

 


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