- Continued Operational Momentum Drives
Strongest Levels of Quarterly Revenue, Gross Profit and Adjusted
EBITDA in Company History -
- Recently Completed Debt Refinancing and
Strategic Investment in CSS to Accelerate Digital Initiatives and
Bolster Foundation for Growth -
Startek, Inc. (NYSE:SRT) ("Startek" or the "Company"), a global
provider of customer experience management solutions, is reporting
financial results for the fourth quarter and full year ended
December 31, 2020.
Fourth Quarter 2020 Financial Highlights ($ in millions,
excl. margin items)
Q4 2020
Q3 2020
Q4 2019
Net Revenue
$
174.5
$
162.7
$
171.6
Gross Profit
$
30.9
$
22.9
$
27.6
Gross Margin
17.7
%
14.1
%
16.1
%
SG&A Expenses
$
15.3
$
14.9
$
19.4
Net Income/(Loss)[1]
$
(7.6
)
$
0.4
$
(5.3
)
Adjusted Net Income[2]
$
8.8
$
3.3
$
5.8
Adjusted EBITDA[2]
$
23.3
$
15.6
$
16.8
[1] Reflects net income (loss)
attributable to Startek shareholders. [2] Refer to the note below about Non-GAAP
financial measures.
Full Year 2020 Financial Highlights ($ in millions, excl.
margin items)
2020
2019
Net Revenue
$
640.2
$
657.9
Gross Profit
$
89.6
$
110.9
Gross Margin
14.0
%
16.9
%
SG&A Expenses
$
62.1
$
91.4
Net Income/(Loss)
$
(39.0
)
$
(15.0
)
Adjusted Net Income
$
8.5
$
4.7
Adjusted EBITDA
$
58.2
$
52.1
Management Commentary
“We generated record results during the fourth quarter with
solid growth across nearly every key financial metric,” said Aparup
Sengupta, Executive Chairman and Global CEO of Startek. “While Q4
is historically our strongest quarter of the year, we further
benefitted from seasonality trends within our existing client base,
including robust e-commerce tailwinds around the holiday season.
This performance, coupled with our consistent focus on cost
management, allowed us to drive sequential and year-over-year
improvements in gross margin and adjusted EBITDA, which also
benefitted from $2.7 million of government grants in Q4. Overall,
our team demonstrated incredible adaptability and execution in 2020
despite one of the most challenging global operating environments
we have ever faced.
“As we entered 2021, we further strengthened our commitment to
enhancing the flexibility of our platform. Subsequent to the fourth
quarter, we completed a $185 million debt refinancing that allows
us to extend our debt maturities and enhance our overall liquidity
position. With this reinforced balance sheet, we can
comprehensively support our current operations while capitalizing
on strategic opportunities to drive long-term, accretive
growth.
“The recent minority investment we made in CSS Corp. (CSS)
represents one such accretive opportunity that will also advance
our ramping digital initiatives. CSS is a robust IT services
company providing mission-critical AI, automation, analytics, cloud
and digital solutions to a growing technology customer base across
five continents. Given the success of our Startek Cloud omnichannel
platform in 2020, we continue to view our digital services as a key
long-term driver of both future revenue growth and margin
expansion. Our investment in CSS accelerates our digitization
initiatives and marks an important inflection point for
Startek.
“Looking ahead to the rest of 2021, we are proud to have built
such a strong foundation to continue driving operational
efficiencies and enhancing our suite of services around the globe.
We are grateful for the dedication of our team and the deep support
of our shareholders as we further execute on our strategic growth
plans.”
Fourth Quarter 2020 Financial Results
Net revenue in the fourth quarter increased to $174.5 million
compared to $171.6 million in the year-ago quarter. The increase
was driven by elevated demand and seasonal strength within the
Company’s existing client network. On a constant currency basis,
net revenue increased 4.7% compared to the prior year period.
Gross profit in the fourth quarter increased by 11.7% to $30.9
million compared to $27.6 million in the year-ago quarter. Gross
margin increased 160 basis points to 17.7% compared to 16.1% in the
year-ago quarter. The increase was primarily driven by the
aforementioned strength within Startek’s existing client base and a
greater revenue mix of high-margin digital services. The margin
expansion was also aided by incremental grants of $2.7 million
received in the fourth quarter.
Selling, general and administrative (SG&A) expenses in the
fourth quarter decreased to $15.3 million compared to $19.4 million
in the year-ago quarter. As a percentage of revenue, SG&A
improved 250 basis points to 8.8% compared to 11.3% in the year-ago
quarter as a result of the continued cost reductions the Company
has implemented over the past several quarters and in response to
COVID-19.
Net loss attributable to Startek shareholders in the fourth
quarter was $7.6 million or $(0.19) per share, compared to a net
loss of $5.3 million or $(0.14) per share in the year-ago quarter.
Net loss in the fourth quarter of 2020 included an approximate
$13.2 million goodwill impairment from COVID-19 related forecasted
declines in the Company’s business in India, South Africa, and
Australia and in Argentina owing primarily to the devaluation of
the local currency.
Adjusted net income* in the fourth quarter increased 50% to $8.8
million or $0.22 per diluted share, compared to adjusted net
income* of $5.8 million or $0.15 per diluted share in the year-ago
quarter.
Adjusted EBITDA* in the fourth quarter increased 38.5% to $23.3
million compared to $16.8 million in the year-ago quarter. The
increase was primarily driven by the aforementioned revenue growth
and margin expansion, cost reductions, and approximately $2.7
million in incremental benefits related to government grants.
On December 31, 2020, cash and restricted cash was $50.6 million
compared to $56.6 million at September 30, 2020. The decrease was
largely driven by increased capital expenditures in this quarter
relative to previous quarters. Total debt at December 31, 2020
remained flat at $136.0 million compared to September 30, 2020, and
net debt at December 31, 2020 was $85.4 million compared to $79.4
million at September 30, 2020.
Full Year 2020 Financial Results
Net revenue in 2020 was $640.2 million compared to $657.9
million in 2019. The decrease was driven by adverse movements in
foreign currency during the year. On a constant currency basis, net
revenue increased 0.9% compared to the prior year. The COVID-19
impact on revenue during the first half of 2020 was offset by new
wins and elevated seasonal demand in the second half of the
year.
Gross profit in 2020 was $89.6 million compared to $110.9
million in 2019. Gross margin was 14.0% compared to 16.9% in 2019.
The decrease was primarily driven by higher costs relative to
revenues in geographies that were heavily impacted by COVID-19
related lockdowns.
Selling, general and administrative (SG&A) expenses in 2020
decreased significantly to $62.1 million compared to $91.4 million
in 2019. As a percentage of revenue, SG&A improved 420 basis
points to 9.7% compared to 13.9% in 2019 as a result of the
company’s sustained cost reductions over the last 12 months and in
response to COVID-19.
Net loss attributable to Startek shareholders in 2020 was $39.0
million or $(0.99) per share, compared to a net loss of $15.0
million or $(0.39) per share in 2019. Net loss in 2020 included an
approximate $35.9 million goodwill impairment charge accounted in
the first quarter and in the fourth quarter due to COVID-19 related
forecasted declines in the Company’s business in India, South
Africa, Australia and in Argentina owing primarily to the
devaluation of the local currency.
Adjusted net income* in 2020 increased to $8.5 million or $0.22
per diluted share, compared to adjusted net income* of $4.7 million
or $0.12 per diluted share in 2019.
Adjusted EBITDA* in 2020 increased 11.7% to $58.2 million
compared to $52.1 million in 2019. The increase was primarily
driven by the Company’s aforementioned cost reductions and
continued focus on prudent expense management, as well as the $2.7
million incremental grant benefit in Q4.
*A non-GAAP measure defined below.
Debt Refinancing and Capital Allocation
Subsequent to the fourth quarter, CSP Alpha Holdings Pte. Ltd.,
a wholly-owned subsidiary of Startek, successfully completed a debt
refinancing with a newly secured $185 million senior debt facility,
comprising a $165 million term loan and a $20 million revolving
credit facility. The term loan bears a moratorium on principal
repayment for 21 months and will amortize quarterly thereafter,
beginning in November 2022. The loan is subject to certain
standardized financial covenants. The proceeds of this loan was
used to repay in full the previous senior debt facility and to also
make the strategic investment in CSS.
On February 25, 2021, Startek announced a strategic investment
in CSS, comprising a $30 million contribution in a limited
partnership managed by Startek’s majority shareholder, Capital
Square Partners, to acquire both an indirect beneficial interest of
approximately 26% in CSS, as well as an option to acquire a
controlling stake. The option to acquire a majority stake in CSS is
at the sole discretion of Startek, and the Company has no
obligation to do so.
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, March 15, 2021 Time: 5:00 p.m. Eastern time
Toll-free dial-in number: (844) 239-5283 International dial-in
number: (574) 990-1022 Conference ID: 4245717
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
March 22, 2021.
Toll-free replay number: (855) 859-2056 International replay
number: (404) 537-3406 Replay ID: 4245717
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 42,000 CX experts spread across
46 delivery campuses in 13 countries. The company services over 220
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
Audited
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Revenue
174,918
172,151
641,844
659,205
Warrant contra revenue
(449
)
(565
)
(1,622
)
(1,295
)
Net Revenue
174,469
171,586
640,222
657,910
Cost of services
(143,598
)
(143,950
)
(550,601
)
(547,014
)
Gross profit
30,871
27,636
89,621
110,896
Selling, general and administrative
expenses
(15,341
)
(19,425
)
(62,116
)
(91,363
)
Impairment losses and restructuring/exit
cost
(13,254
)
(7,758
)
(37,799
)
(9,827
)
Acquisition related cost
-
-
-
11
Operating Income (Loss)
2,276
453
(10,294
)
9,717
Share of loss of equity-accounted
investees
(6
)
(1,214
)
(31
)
(226
)
Interest expense, net
(2,692
)
(3,960
)
(13,376
)
(15,824
)
Exchange gain / (loss), net
(1,853
)
401
(2,183
)
(2,157
)
Loss before income taxes
(2,275
)
(4,320
)
(25,884
)
(8,490
)
Tax expense
(1,951
)
(241
)
(7,760
)
(4,791
)
Net Loss
(4,226
)
(4,561
)
(33,644
)
(13,281
)
Net Income (Loss)
Net income attributable to noncontrolling
interests
3,351
730
5,341
1,737
Net loss attributable to Startek
shareholders
(7,577
)
(5,291
)
(38,985
)
(15,018
)
(4,226
)
(4,561
)
(33,644
)
(13,281
)
Net loss per common share:
Basic net loss attributable to Startek
shareholders
(0.19
)
(0.14
)
(0.99
)
(0.39
)
Diluted net loss attributable to Startek
shareholders
(0.19
)
(0.14
)
(0.99
)
(0.39
)
Weighted average common shares
outstanding:
Basic
40,333
38,492
39,442
38,132
Diluted
40,333
38,492
39,442
38,132
STARTEK, INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Audited)
(In thousands, except share and
per share data)
December 31, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
44,507
20,464
Restricted cash
6,052
12,162
Trade accounts receivables, net
83,560
108,479
Unbilled revenue
49,779
41,449
Prepaid and other current assets
14,542
12,008
Total current assets
198,440
194,562
Non-current assets
Property, plant and equipment, net
34,225
37,507
Operating lease right-of-use assets
69,376
73,692
Intangible assets, net
100,440
110,807
Goodwill
183,397
219,341
Investment in equity accounted
investees
111
553
Deferred tax assets, net
5,294
5,251
Prepaid expenses and other non-current
assets
13,370
16,370
Total non-current assets
406,213
463,521
Total assets
604,653
658,083
Liabilities and Stockholders’
Equity
Current liabilities
Trade accounts payables
20,074
25,449
Accrued expenses
57,118
45,439
Short term debt
15,505
26,491
Current maturity of long term debt
2,180
18,233
Current maturity of operating lease
liabilities
19,327
19,677
Other current liabilities
39,987
37,159
Total current liabilities
154,191
172,448
Non-current liabilities
Long term debt
118,315
130,144
Operating lease liabilities
52,052
54,341
Other non-current liabilities
15,498
11,140
Deferred tax liabilities, net
17,715
18,226
Total non-current liabilities
203,580
213,851
Total liabilities
357,771
386,299
Stockholders’ equity
Common stock, 60,000,000 non-convertible
shares, $0.01 par value, authorized; 40,453,462 and 38,525,636
shares issued and outstanding at December 31, 2020 and December 31,
2019
405
385
Additional paid-in capital
288,700
276,827
Accumulated deficit
(85,543
)
(46,145
)
Accumulated other comprehensive loss
(7,286
)
(6,022
)
Equity attributable to Startek
shareholders
196,276
225,045
Noncontrolling interest
50,606
46,739
Total stockholders’ equity
246,882
271,784
Total liabilities and stockholders’
equity
604,653
658,083
STARTEK, INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Audited)
(In thousands, except per share
amounts)
Year Ended December
31,
2020
2019
Operating activities
Net loss
(33,644
)
(13,281
)
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization
28,201
29,723
Impairment of goodwill
35,944
7,146
Loss on sale of property, plant and
equipment
167
-
Provision for doubtful accounts
2,662
1,640
Amortisation of debt issuance cost
1,454
1,414
Warrant contra revenue
1,622
1,295
Share-based compensation expense
832
1,516
Deferred income taxes
(276
)
(1,101
)
Share of loss of equity accounted
investees
31
226
Changes in operating assets and
liabilities
Trade accounts receivables, net
19,971
(4,492
)
Prepaid and other assets
(11,376
)
4,199
Trade accounts payables
(4,635
)
(734
)
Income taxes, net
2,668
(542
)
Accrued expenses and other liabilities
22,432
962
Net cash generated from operating
activities
66,053
27,971
Investing activities
Purchase of property, plant and
equipment
(17,414
)
(15,564
)
Proceeds from equity accounted
investees
395
1,308
Net cash used in investing
activities
(17,019
)
(14,256
)
Financing activities
Proceeds from issuance of common stock
9,026
6,710
Payments on long term debt
(8,400
)
(9,800
)
Payments on line of credit, net
(24,529
)
(6,623
)
(Payments on) / proceeds from other
borrowings, net
(7,304
)
4,351
Net cash used in from financing
activities
(31,207
)
(5,362
)
Net increase in cash and cash
equivalents
17,827
8,353
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
106
(296
)
Cash and cash equivalents and restricted
cash at the beginning of period
32,626
24,569
Cash and cash equivalents and
restricted cash at the end of period
50,559
32,626
Components of cash and cash equivalents
and restricted cash
Balances with banks
44,507
20,464
Restricted cash
6,052
12,162
Total cash and cash equivalents and
restricted cash
50,559
32,626
Supplemental disclosure of Cash Flow
Information
Cash paid for interest and other finance
cost
13,080
15,329
Cash paid for income taxes
4,795
6,379
Government grants/subsidy received
2,689
-
Non cash warrant contra revenue
1,622
1,295
Non cash share-based compensation
expenses
832
1,516
STARTEK, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (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 December
31,
Year Ended December
31,
2020
2019
2020
2019
Net Loss
(4,226
)
(4,561
)
(33,644
)
(13,281
)
Income tax expense
1,951
241
7,760
4,791
Interest and other expense, net
2,699
5,174
13,407
16,050
Exchange gain/(loss), net
1,853
(401
)
2,183
2,157
Depreciation and amortization expense
6,922
7,667
28,201
29,723
Impairment losses and restructuring
cost
13,254
7,758
37,799
9,817
Share-based compensation expense
385
365
832
1,516
Warrant contra revenue
449
565
1,622
1,295
Adjusted EBITDA
23,287
16,808
58,160
52,068
Adjusted EPS:
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Profit attributable to Startek
shareholders
(7,577
)
(5,291
)
(38,985
)
(15,018
)
Add: Share based compensation expense
385
365
832
1,516
Add: Amortization of intangible assets,
net of tax
2,277
2,279
9,078
8,956
Add: Warrant contra revenue
449
565
1,622
1,295
Add: Goodwill impairment loss
13,236
7,146
35,944
7,146
Add: Deferred tax adjustments
-
780
-
780
Adjusted net income / (loss)
(non-GAAP)
8,770
5,844
8,491
4,675
Weighted average common shares outstanding
- Basic
40,333
38,492
39,442
38,132
Weighted average common shares outstanding
- Diluted
40,333
38,492
39,442
38,132
Adjusted EPS - Basic
0.22
0.15
0.22
0.12
Adjusted EPS - Diluted
0.22
0.15
0.22
0.12
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210315005787/en/
Investor Relations Sean Mansouri, CFA Gateway Investor
Relations (949) 574-3860 SRT@gatewayir.com
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