StarTek, Inc. (NYSE:SRT) today announced its financial results
for the first quarter ended March 31, 2012. The Company reported
first quarter 2012 revenue of $50.9 million and adjusted EBITDA of
$1.2 million. As of March 31, 2012, the Company had approximately
$10.5 million in cash and cash equivalents and no debt.
First Quarter 2012 Financial Results
First quarter 2012 revenue decreased 0.6% compared to the fourth
quarter of 2011. Revenue offshore increased 18% in the first
quarter of 2012, compared to the fourth quarter of 2011. The
increase was due to revenue growth of $2.3 million, or 13%, in Asia
Pacific (the Philippines) and $1.4 million, or 54%, in Latin
America. Domestic revenue decreased by approximately $3.8 million
due to the ramp-down of business in our Decatur and Jonesboro
locations and the site closure in Collinsville.
Gross margin increased to 10.5% in the first quarter of 2012
from 7.7% in the fourth quarter of 2011. The improvement was due to
continued growth in Asia Pacific and Latin America. Gross margin in
Asia Pacific increased from 22% to 25%. Gross profit in Latin
America increased by $0.8 million in the first quarter of 2012 from
the fourth quarter 2011, as new business continued ramping in the
Company’s Costa Rica and Honduras facilities. Domestic gross margin
fell slightly from 4% to 3% due to the ramp-down of business
discussed above.
SG&A expense for the quarter totaled $8.3 million, compared
to $9.3 million in the fourth quarter of 2011. The decrease was
driven primarily by lower IT related and support staff costs.
The Company reported first quarter 2012 adjusted EBITDA of $1.2
million and an operating loss before impairment and restructuring
charges of $3.0 million, compared to a fourth quarter 2011 adjusted
EBITDA of negative $1.2 million and an operating loss before
impairment and restructuring charges of $5.4 million. The Company
had a net loss of $6.1 million, or $0.40 per share, during the
first quarter of 2012. The first quarter 2012 net loss compares to
a net loss of $7.5 million, or $0.49 per share, in the fourth
quarter of 2011.
Liquidity and Capital Resources
As of March 31, 2012, the Company had approximately $10.5
million in cash and cash equivalents and no debt, compared to $9.7
million and no debt at December 31, 2011. The Company had
approximately $1.2 million and $1.5 million in capital expenditures
during the quarters ending March 31, 2012 and December 31, 2011,
respectively.
Recent 2012 Operational Highlights
- Excluding its two largest clients, the
Company experienced revenue growth of 52%, compared to the first
quarter of 2011 and 21% compared to the fourth quarter of
2011;
- Signed a new expanded $20 million
credit facility with Wells Fargo Bank;
- Continued its sales momentum, signing
three new agreements with an expected annual contract value of $8.5
million;
- Continued growth in the Philippines,
increasing the quarterly number of full-time equivalent agents by
7% from the fourth quarter of 2011;
- Continued growth in Latin America,
increasing the quarterly number of full-time equivalent agents by
39% from the fourth quarter of 2011;
- Added a new SVP, Sales and Marketing;
and
- Announced the relocation of its
corporate headquarters, which will result in significant
savings.
“I am very pleased with the progress made strengthening our
company foundation during the quarter,” said Chad Carlson,
President and Chief Executive Officer. “We grew our client revenues
(excluding our largest two clients), greatly improved DSO through
better process management and we are on track with our roadmap
initiatives, which will bring further G&A savings into second
half of this year. The continuation of successful new program
launches in the Philippines and Latin America resulted in
significant margin improvement in those regions,” said Chad
Carlson. “In addition, I am excited about the addition of Joe
Duryea as our SVP, Sales and Marketing, whom I believe has proven
experience at attracting and leading successful business
development teams and launching new verticals.”
Effective January 1, 2012, the Company realigned its segment
reporting into three distinct operating segments: Domestic (results
from U.S. and Canadian sites), Asia Pacific (results from
Philippine sites) and Latin America (results from Costa Rican and
Honduran sites). In addition, during the quarter the Company began
presenting certain human resource, recruiting and facility costs
within cost of services, rather than SG&A, to provide enhanced
clarity on the Company’s operations and cost structure and to drive
segment efficiencies and accountability. First quarter of 2011
financial information in this release has been adjusted to provide
comparability.
For additional information on revenue, margin and operating
metrics, please refer to the Financial Scorecard posted on the
Investor Relations section of the Company’s website
(investor.startek.com). Further details regarding the earnings call
are described below.
Conference Call and Webcast Details
The Company will host a conference call today, May 10, 2012, at
9:00 a.m. MDT (11:00 a.m. EDT) to discuss its first quarter 2012
financial results. To participate in the teleconference, please
call toll-free 800-322-5044 (or 617-614-4927 for international
callers) and enter “70960167”. You may also listen to the
teleconference live via the Company’s website at www.startek.com.
For those that cannot access the live broadcast, a replay will be
available on the Company’s website at www.startek.com.
About StarTek
StarTek, Inc. is a global provider of business process
outsourcing services with over 9,000 employees, whom we refer to as
Brand Warriors, that have been committed to making a positive
impact on our clients’ business results for over 25 years. Our
company mission is to enable and empower our employees to advance
our clients’ brands every day to bring value to our stakeholders.
We accomplish this by aligning with our clients’ business
objectives resulting in a trusted partnership. The StarTek
Advantage System provides the expertise, best practices and thought
leadership to move our clients’ programs toward specific,
measurable goals and improve year over year performance. The
foundation for this is the StarTek Operating Platform, which
includes execution and innovation in every area of the core
operating process. Examples of this process would include:
onboarding our employees, enabling our employees, executing against
goals, evaluating performance, improving performance and enhancing
our client’s business. StarTek has proven results for the multiple
services we provide including sales, order management and
provisioning, customer care, technical support, receivables
management, and retention programs. We manage programs using a
variety of multi-channel customer interaction capabilities
including voice, chat, email, IVR and back-office support. StarTek
has delivery centers in the U.S., Philippines, Canada, Costa Rica,
Honduras and through its StarTek@Home workforce. For more
information, visit www.StarTek.com or call +1303.262.4500.
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.
These factors include, but are not limited to, risks relating to
our reliance on two significant customers, consolidation by our
clients, the concentration of our business in the
telecommunications industry, pricing pressure, maximization of
capacity utilization, lack of success of our clients’ products and
services, consolidation of vendors by our clients, interruptions to
the Company’s business due to geopolitical conditions and/or
natural disasters, foreign currency exchange risk, lack of minimum
purchase requirements in our contracts, ability to hire and retain
qualified employees, the timely development of new products or
services, failure to implement new technological advancements,
increases in labor costs, lack of wide geographic diversity,
continuing unfavorable economic conditions, our ability to
effectively manage growth, increases in the cost of telephone and
data services, unauthorized disclosure of confidential client or
client customer information, risks inherent in the operation of
business outside of North America, ability of our largest
stockholder to affect decisions, stock price volatility, variation
in quarterly operating results and inability to renew or replace
sources of capital funding. Readers are encouraged to review Item
1A. - Risk Factors and all other disclosures appearing in the
Company's Form 10-K for the year ended December 31, 2011 filed with
the Securities and Exchange Commission, for further information on
risks and uncertainties that could affect StarTek’s business,
financial condition and results of operation.
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Dollars in thousands, except per share
data)
(Unaudited)
Three Months Ended March 31, 2012
2011 Revenue $ 50,859 $ 59,510 Cost of services
45,522 53,804 Gross profit 5,337 5,706
Selling, general and administrative expenses 8,325 7,999 Impairment
losses and restructuring charges 3,086 -
Operating loss (6,074 ) (2,293 ) Net interest and other
income 103 18 Loss before income taxes
(5,971 ) (2,275 ) Income tax expense (161 ) (279 )
Net loss $ (6,132 ) $ (2,554 ) Net loss per share
Basic $ (0.40 ) $ (0.17 ) Diluted $ (0.40 ) $ (0.17 )
Weighted average shares outstanding (in thousands) Basic 15,189
15,014 Diluted 15,189 15,014
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
& STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
As of March 31, 2012
December 31, 2011
ASSETS Current assets: Cash, cash equivalents and
investments $ 10,471 $ 9,719 Trade accounts receivable 36,692
37,736 Other current assets 8,974 8,872 Total current
assets 56,137 56,327 Property, plant and equipment, net
33,512 38,475 Other assets 6,426 6,631 Total assets $
96,075 $ 101,433
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 23,927 $ 23,485 Other liabilities
3,146 3,586 Total liabilities 27,073 27,071
Stockholders' equity 69,002 74,362 Total liabilities
and stockholders' equity $ 96,075 $ 101,433
Three Months Ended March 31,
2012 2011 Operating Activities Net loss
$ (6,132 ) $ (2,554 ) Adjustments to reconcile net loss to net cash
provided by operating activities: Depreciation 3,810 3,986
Impairment losses 3,086 - Non-cash compensation cost 334 449
Changes in operating assets & liabilities and other, net
691 1,498 Net cash provided by operating
activities 1,789 3,379
Investing
Activities Purchases of property, plant and equipment (1,162 )
(1,928 ) Proceeds from note receivable 165 165
Net cash used in investing activities (997 )
(1,763 )
Financing Activities Other financing, net 4
139 Net cash provided by financing activities
4 139 Effect of exchange rate changes on cash (44 )
(115 ) Net increase in cash and cash equivalents 752 1,640 Cash and
cash equivalents at beginning of period 9,719
18,740 Cash and cash equivalents at end of period $ 10,471
$ 20,380
STARTEK, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Dollars in
thousands)(Unaudited)
The information presented in this press release reports 1)
adjusted EBITDA, which the Company defines as net income (loss)
plus income tax expense, interest income (expense), impairment and
restructuring charges, depreciation expense and stock compensation
expense and 2) operating loss before impairment and restructuring
charges. The following tables provide reconciliation of 1) adjusted
EBIDTA to net loss calculated in accordance with GAAP and 2)
operating loss before impairment and restructuring charges to
operating loss calculated in accordance with GAAP. This non-GAAP
information should not be construed as an alternative to the
reported results determined in accordance with generally accepted
accounting principles in the United States (GAAP). It is provided
solely to assist in an investor’s understanding of these items on
the comparability of the Company’s operations. A reconciliation of
the GAAP amounts to the non-GAAP amounts is shown below.
Adjusted EBITDA:
Three Months Ended March 31, 2012
December 31, 2011 Net loss $ (6,132 ) $ (7,461
) Income tax expense 161 137 Interest income (17 ) (25 ) Impairment
losses & restructuring charges 3,086 1,933 Depreciation expense
3,810 3,802 Stock compensation expense 334 408
Adjusted EBITDA $ 1,242 $ (1,206 )
Operating Loss Before Impairment and
Restructuring Charges:
Three Months Ended March 31, 2012
December 31, 2011 Operating loss $ (6,074 ) $
(7,346 ) Impairment & restructuring charges 3,086
1,933 Operating loss before impairment and
restructuring charges $ (2,988 ) $ (5,413 )
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