- Sequential Quarterly Improvements Across Key
Financial Metrics Demonstrate Continued Progress of Recovery -
- Focus on Cost Management and Digital
Optimization Drives Strong Operational Momentum -
Startek, Inc. (NYSE:SRT), a global provider of customer
experience management solutions, is reporting financial results for
the third quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights ($ in
millions)
Q3 2020
Q2 2020
Q3 2019
Net Revenue
$162.7
$142.2
$164.6
Gross Profit
$22.9
$15.8
$28.5
Gross Margin
14.1%
11.1%
17.3%
SG&A Expenses
$14.9
$14.6
$22.9
Net Income/(Loss)1
$0.4
$(5.2)
$(2.8)
Adjusted EBITDA2
$15.6
$8.8
$13.4
Management Commentary
“Our third quarter performance demonstrates our continued
progress in recovering from the pandemic and further improving
operational efficiency,” said Aparup Sengupta, Executive Chairman
and Global CEO of Startek. “We drove sequential quarterly
improvements across all key financial metrics, as well as
significant year-over-year growth on the bottom line. Further, we
are operating at close to full strength relative to pre-COVID
levels, with over 90% of our global workforce now active in either
remote or on-campus environments. I am proud of our team’s agility
and deep commitment to maintaining the quality and continuity of
our services during this challenging period.
“The operational improvements and digital initiatives we have
implemented over the past several quarters have allowed us to
expand our scope of work within our core verticals and launch
several new client programs, all while maintaining a keen focus on
cost management. This has been further supported by continued
robust demand in the e-commerce and healthcare sectors, where
clients are increasingly leveraging our differentiated, rapidly
evolving digital solutions. Our recently introduced StarCloud
omnichannel platform also continues to provide a seamless and
secure customer experience for our clients by enabling remote work
environments for our teams across the globe.
“Looking ahead, we expect our digital initiatives to be a key
driver of both future revenue growth and operating leverage, as we
believe the hybrid remote work structure is here to stay for the
long-term. As such, we have recently reduced our physical capacity
by nearly 10%. We remain well prepared for a resurgence in COVID-19
cases within any of our geographies, as we now have the flexibility
to quickly pivot operations with our StarCloud technology. With a
strong foundation in place, we believe we are in the early innings
of the next phase of growth for Startek as we look to carry our
momentum into next year.”
Third Quarter 2020 Financial Results
Net revenue in the third quarter was $162.7 million compared to
$164.6 million in the third quarter of 2019. The slight decrease
was driven by depreciation of the Argentina Peso & the Indian
Rupees, warrant contra revenue and the continued impact of COVID-19
lockdowns and lower active workforce in certain geographies. On a
constant currency basis, net revenue increased 3.5% compared to the
prior year period.
Gross profit in the third quarter was $22.9 million compared to
$28.5 million in the year-ago quarter. Gross margin was 14.1%
compared to 17.3% in the year ago quarter. The decrease was
primarily driven by higher outsourcing, contract, maintenance and
communication expenses, partially offset by lower travelling and
recruitment costs.
Selling, general and administrative (SG&A) expenses in the
third quarter decreased to $14.9 million compared to $22.9 million
in the year-ago quarter. As a percentage of revenue, SG&A
improved 480 basis points to 9.1% compared to 13.9% in the year-ago
quarter as a result of the cost reductions the company has
implemented over the last 12 months and in response to
COVID-19.
Net income attributable to Startek shareholders in the third
quarter increased significantly to $0.4 million or $0.01 per
diluted share, compared to a net loss of $2.8 million or $(0.07)
per share in the year-ago quarter. The increase was driven by
prudent expense management throughout the organization.
Adjusted net income* in the third quarter increased
significantly to $3.3 million, or $0.08 per diluted share, compared
to an adjusted net loss* of $0.5 million or $(0.01) per share in
the year-ago quarter.
Adjusted EBITDA* in the third quarter increased 16.8% to $15.6
million compared to $13.4 million in the year-ago quarter. The
increase was primarily driven by the aforementioned cost reductions
and focus on prudent expense management.
On September 30, 2020, cash and restricted cash increased
slightly to $56.6 million compared to $56.4 million at June 30,
2020. The increase is primarily the result of continued tight
control over costs and accounts payable and deferred principal debt
payments. Total debt at the end of the quarter reduced to $136.0
million compared to $149.9 million at June 30, 2020, primarily due
to lower drawdowns of the revolver and working capital facilities.
As a result, net debt at September 30, 2020 reduced to $79.4
million compared to $93.5 million at June 30, 2020. Per conditions
of the company’s Restated Senior Debt agreement, Startek plans to
make a $4.2 million principal repayment in November that was
previously deferred.
*A non-GAAP measure defined below.
_______________
1
Reflects net income (loss) attributable to
Startek shareholders.
2
Refer to the note below about Non-GAAP
financial measures.
Conference Call and Webcast Details
Startek management will hold a conference call today at 5:00
p.m. Eastern time to discuss its financial results. The conference
call will be followed by a question and answer period.
Date: Monday, November 9, 2020 Time: 5:00 p.m. Eastern time
Toll-free dial-in number: (844) 239-5283 International dial-in
number: (574) 990-1022 Conference ID: 6192319
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 be broadcast live and available for
replay here, as well as in the investor relations section of the
company’s website at www.startek.com.
A telephonic replay of the conference call will also be
available after 8:00 p.m. Eastern time on the same day through
November 16, 2020.
Toll-free replay number: (855) 859-2056 International replay
number: (404) 537-3406 Replay ID: 6192319
About Startek
Startek is a global provider of tech-enabled business process
management solutions. The company provides omni-channel customer
experience, digital transformation, and technology services to some
of the finest brands globally. Startek is committed to impacting
clients’ business outcomes by focusing on enhancing customer
experience and digital & AI enablement across all touch points
and channels. Startek has more than 40,000 CX experts spread across
46 delivery campuses in 13 countries. The company services over 250
clients across a range of industries such as Banking and Financial
Services, Insurance, Technology, Telecom, Healthcare, Travel &
Hospitality, Ecommerce, Consumer Goods, Retail, and Energy &
Utilities. 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-K for the fiscal
year ended December 31, 2019, as filed with the Securities and
Exchange Commission (SEC) on March 12, 2020, 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 SEC, 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 INCOME (LOSS)
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Revenue
163,097
164,630
466,926
487,054
Warrant contra revenue
(410
)
-
(1,173
)
(730
)
Net Revenue
162,687
164,630
465,753
486,324
Cost of services
(139,808
)
(136,142
)
(407,003
)
(403,064
)
Gross profit
22,879
28,488
58,750
83,260
Selling, general and administrative
expenses
(14,876
)
(22,926
)
(46,774
)
(71,938
)
Impairment losses and restructuring/exit
cost
12
(220
)
(24,545
)
(2,069
)
Acquisition related cost
-
-
-
11
Operating Income/ (Loss)
8,015
5,342
(12,569
)
9,264
Share of (loss) / profit of equity
accounted investees
(5
)
(16
)
(25
)
988
Interest expense, net
(3,988
)
(3,372
)
(10,684
)
(11,864
)
Exchange loss, net
(621
)
(1,880
)
(331
)
(2,558
)
Income /(Loss) before income
taxes
3,401
74
(23,609
)
(4,170
)
Income tax expense
1,649
3,436
5,808
4,550
Net lncome / (Loss)
1,752
(3,362
)
(29,417
)
(8,720
)
Net income/ (Loss)
Net income /(loss) attributable to
non-controlling interests
1,385
(575
)
1,990
1,007
Net income/ (loss) attributable to Startek
shareholders
367
(2,787
)
(31,407
)
(9,727
)
Net gain /(loss) per common share -
basic
0.01
(0.07
)
(0.80
)
(0.26
)
Net gain /(loss) per common share -
diluted
0.01
(0.07
)
(0.80
)
(0.26
)
Weighted average common shares outstanding
- basic
40,275
38,467
39,143
38,011
Weighted average common shares outstanding
- diluted
40,626
38,467
39,143
38,011
STARTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net Income / (Loss)
1,752
(3,362
)
(29,417
)
(8,720
)
Net income/ (Loss) attributable to
non-controlling interests
1,385
(575
)
1,990
1,007
Net Income/ (Loss) attributable to Startek
shareholders
367
(2,787
)
(31,407
)
(9,727
)
Other comprehensive (loss) / income,
net of taxes:
Foreign currency translation
adjustments
936
(1,899
)
(2,729
)
(1,299
)
Change in fair value of derivative
instruments
103
(298
)
(577
)
50
Pension amortization
774
(9
)
(1,856
)
(70
)
Comprehensive (loss) / income
1,813
(2,206
)
(5,162
)
(1,319
)
Other comprehensive (loss) / income,
net of taxes
Other comprehensive (loss) / income
attributable to non-controlling interest
413
(19
)
(1,211
)
(45
)
Other comprehensive (loss) / income
attributable to Startek shareholders
1,400
(2,187
)
(3,951
)
(1,274
)
1,813
(2,206
)
(5,162
)
(1,319
)
Comprehensive (loss) / income
Comprehensive (loss)/income attributable
to non-controlling interests
1,798
(594
)
779
962
Comprehensive (loss)/ income attributable
to Startek shareholders
1,767
(4,974
)
(35,358
)
(11,001
)
3,565
(5,568
)
(34,579
)
(10,039
)
STARTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
data)
(Unaudited)
September 30,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
48,463
20,464
Restricted cash
8,122
12,162
Trade accounts receivable, net
77,767
108,479
Unbilled revenue
40,126
41,449
Prepaid and other current assets
12,612
12,008
Total current assets
187,090
194,562
Property, plant and equipment, net
34,423
37,507
Operating lease right-of-use assets
70,256
73,692
Intangible assets, net
103,042
110,807
Goodwill
196,633
219,341
Investment in associates
109
553
Deferred tax assets, net
2,782
5,251
Prepaid expenses and other non-current
assets
13,140
16,370
Total assets
607,475
658,083
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payables
14,591
25,449
Accrued expenses
64,375
45,439
Short term debt
15,206
26,491
Current maturity of long term debt
19,142
18,233
Current maturity of operating lease
obligation
18,649
19,677
Other current liabilities
39,854
37,159
Total current liabilities
171,817
172,448
Long term debt
101,626
130,144
Operating lease liabilities
52,854
54,341
Other non-current liabilities
17,378
11,140
Deferred tax liabilities, net
16,596
18,226
Total liabilities
360,271
386,299
Commitments and contingencies
—
—
Stockholders’ equity:
Common stock, 60,000,000 non-convertible
shares, $0.01 par value, authorized; 40,288,453 and 38,525,636
shares issued and outstanding at September 30, 2020 and December
31, 2019, respectively
403
385
Additional paid-in capital
287,221
276,827
Accumulated deficit
(77,965
)
(46,145
)
Accumulated other comprehensive loss
(9,973
)
(6,022
)
Equity attributable to Startek
shareholders
199,686
225,045
Non-controlling interest
47,518
46,739
Total stockholders’ equity
247,204
271,784
Total liabilities and stockholders’
equity
607,475
658,083
STARTEK, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September
30,
2020
2019
Operating Activities
Net loss
$
(29,417
)
$
(8,720
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
21,279
22,056
Impairment of goodwill
22,708
-
Loss /(profit) on sale of property, plant
and equipment
181
(223
)
Provision for doubtful accounts
2,089
1,238
Warrant contra revenue
1,173
730
Share-based compensation expense
447
1,151
Deferred income taxes
1,192
209
Share of loss / (profit) of equity
accounted investees
25
(988
)
Changes in operating assets and
liabilities:
Trade accounts receivable, net
26,171
(1,529
)
Prepaid expenses and other assets, current
and noncurrent
(117
)
(950
)
Trade accounts payable
(10,155
)
(5,236
)
Income taxes, net
1,300
(2,267
)
Accrued expenses and other liabilities,
current and noncurrent
27,421
1,150
Net cash generated from operating
activities
$
64,297
$
6,621
Investing Activities
Purchases of property, plant and
equipment
(10,141
)
(9,027
)
Proceeds from equity-accounted
investees
429
1,317
Net cash used in investing
activities
$
(9,712
)
$
(7,710
)
Financing Activities
Proceeds from the issuance of common
stock
8,379
6,563
Payments on long term debt
(4,200
)
(7,000
)
Proceeds from (payments on) other debt,
net
(34,549
)
5,831
Net cash (used in) / generated from
financing activities
$
(30,370
)
$
5,394
Net increase in cash and cash
equivalents
24,215
4,305
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
(256
)
(497
)
Cash and cash equivalents and restricted
cash at the beginning of the period
32,626
24,569
Cash and cash equivalents and
restricted cash at the end of the period
$
56,585
$
28,377
Components of cash and cash equivalents
and restricted cash
Balances with banks
48,463
17,795
Restricted cash
8,122
10,582
Total cash and cash equivalents and
restricted cash
$
56,585
$
28,377
Supplemental disclosure of Cash Flow
Information
Cash paid for Interest and other finance
cost
10,392
11,179
Cash paid for income taxes
2,752
6,740
Non cash warrant contra revenue
1,173
730
Non cash share-based compensation
expenses
447
1,151
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 acquisition 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 EPS:
Adjusted EPS is a non-GAAP financial
measure presenting the earnings generated by our ongoing operations
that we believe is useful to investors in making meaningful
comparisons to other companies, although our measure of Adjusted
EPS may not be directly comparable to similar measures used by
other companies, and period-over-period comparisons. Adjusted EPS
is defined as our diluted earnings per common share attributable to
Startek shareholders adjusted to exclude the effects of the
amortization of acquisition-related intangible assets, investments
that investors may want to evaluate separately (such as based on
fair value) and the impact of certain events, gains, losses or
other charges that affect period-over-period comparisons.
Acquisition-related intangible assets are recognized as a result of
the application of Accounting Standards Codification Topic (“ASC”)
805, Business Combinations (such as customer relationships and
Brand), and their amortization is significantly affected by the
size and timing of our acquisitions.
Adjusted EBITDA:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net Profit/(Loss)
1,752
(3,362
)
(29,417
)
(8,720
)
Income tax expense
1,649
3,436
5,808
4,550
Interest and other expense, net
3,993
3,388
10,708
10,876
Exchange loss, net
621
1,880
331
2,558
Depreciation and amortization expense
6,951
7,424
21,279
22,056
Impairment losses and restructuring
cost
(12
)
220
24,545
2,058
Share-based compensation expense
238
370
447
1,151
Warrant contra revenue
410
-
1,173
730
Adjusted EBITDA
15,602
13,356
34,874
35,259
Adjusted EPS:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Profit/ (Loss) attributable to Startek
shareholders
367
(2,787
)
(31,407
)
(9,727
)
Add: Share based compensation expense
238
370
447
1,151
Add: Amortization of intangible assets
2,279
1,962
6,801
6,701
Add: Warrant contra revenue
410
-
1,173
730
Add: Goodwill impairment loss
-
-
22,708
-
Adjusted net income / (loss)
(non-GAAP)
3,294
(455
)
(277
)
(1,145
)
Weighted average common shares outstanding
- Basic & Diluted
40,275
38,467
39,143
38,011
Weighted average common shares outstanding
- Diluted
40,626
38,467
39,143
38,011
Adjusted EPS - Basic
0.08
(0.01
)
(0.01
)
(0.03
)
Adjusted EPS - Diluted
0.08
(0.01
)
(0.01
)
(0.03
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201109005985/en/
Investor Relations Sean Mansouri, CFA Gateway Investor
Relations (949) 574-3860 investor@startek.com
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