– First Quarter Marked Continued Progress Enhancing Sales Ecosystem, Bolstering Technology Infrastructure and Strengthening Digital Solutions –

DENVER–(BUSINESS WIRE)–Startek, Inc. (NYSE:SRT) (“Startek” or the “Company”), a global customer experience (CX) solutions provider, is reporting financial results for the first quarter ended March 31, 2022.

First Quarter 2022 Financial Summary ($ in millions, excl. margin items)

 

 

Q1 2022

 

 

Q1 2021

 

 

Change

Net Revenue

 

$

167.3

 

 

$

163.1

 

 

 

2.6%

Gross Profit

 

$

21.1

 

 

$

24.7

 

 

 

(14.6)%

Gross Margin

 

 

12.6%

 

 

 

15.1%

 

 

-250bps

SG&A Expenses

 

$

15.9

 

 

$

14.2

 

 

 

12.0%

Net Loss [1]

 

$

(1.2)

 

 

$

(12.2)

 

 

 

90.2%

EPS[1]

 

$

(0.03)

 

 

$

(0.30)

 

 

 

90.0%

Adjusted Net Income [2], [3]

 

$

1.9

 

 

$

1.7

 

 

 

11.8%

Adjusted EPS[2], [3]

 

$

0.05

 

 

$

0.04

 

 

 

25.0%

Adjusted EBITDA[3]

 

$

13.7

 

 

$

18.0

 

 

 

(23.9)%

[1] Reflects net loss attributable to Startek shareholders.

[2] Reflects Adjusted net income attributable to Startek shareholders.

[3] Refer to the note below about Non-GAAP financial measures.

Management Commentary

“We continued to make progress on our growth priorities in the first quarter as we made further enhancements across our organization, while continuing to sustain year-over-year revenue growth in key verticals and geographies,” said Bharat Rao, Global CEO of Startek. “Our goal going into the new fiscal year was to make significant strides building out our sales pipeline, while continuing to invest in our digital solutions and capabilities across the organization. As a result, we added several key sales leaders to our ecosystem, improved our marketing efforts, strengthened our technology infrastructure and entered into key digital partnerships to bolster our solutions. While macro headwinds, particularly wage inflation, and the investments we’ve made in strengthening our infrastructure and capabilities impacted profitability, we believe the groundwork we are laying today will drive sustainable growth in the future.

“Looking at the remainder of the year and beyond, we are confident in the sales team we have put together to aggressively pursue new growth opportunities. We also intend to continue our efforts optimizing our cost structure and right-sizing our footprint to better adapt to our hybrid working environment for employees and customers. Our marketing activity continues to focus on building a strong foundation across people, process and technology and on raising awareness of Startek as an agile, digital-first CX provider for brands across North America. In the quarter, we began leveraging our partnerships with digital solutions providers to amplify our message. We will continue to build on our partnerships for added reach and engagement. Although there is much work still to be done, we remain confident in our ability to execute upon our strategy to accelerate growth.”

First Quarter 2022 Financial Results

Net revenue in the first quarter increased slightly to $167.3 million compared to $163.1 million in the year-ago quarter. The increase was primarily driven by year-over-year growth in the telecom and financial & business verticals. On a constant currency basis, net revenue increased 4.9% compared to the year-ago quarter.

Gross profit in the first quarter was $21.1 million compared to $24.7 million in the year-ago quarter. Gross margin was 12.6% compared to 15.1% in the year-ago quarter. The decrease was attributable to wage increases led by inflationary pressures, as well as increased investments in upgrading our technology and cybersecurity infrastructure.

Selling, general and administrative (SG&A) expenses in the first quarter were $15.9 million compared to $14.2 million in the year-ago quarter. As a percentage of revenue, SG&A was 9.5% compared to 8.7% in the year-ago quarter. The increase was primarily a result of the Company’s continued investment in core sales, digital, and marketing platform capabilities as part of the Company’s organic growth strategy.

Net loss attributable to Startek shareholders in the first quarter improved to $1.2 million or $(0.03) per share, compared to a net loss of $12.2 million or $(0.30) per share in the year-ago quarter. The loss in the prior year period was driven by cost of debt refinancing.

Adjusted net income* in the first quarter was $1.9 million or $0.05 per diluted share, compared to an adjusted net income* of $1.7 million or $0.04 per share in the year-ago quarter.

Adjusted EBITDA* in the first quarter was $13.7 million compared to $18.0 million in the year-ago quarter. The primary driver for the decline was the aforementioned decrease in gross profit and increase in SG&A expenses.

On March 31, 2022, cash and restricted cash was $52.2 million1 compared to $55.4 million at December 31, 2021. Total debt at March 31, 2022 was $169.5 million compared to $170.0 million at December 31, 2021, and net debt at March 31, 2022 was $117.3 million2 compared to $114.6 million at December 31, 2021.

During the three months ended March 31, 2022, the Company repurchased an aggregate of 259,407 shares of its common stock under its repurchase plan, at an average cost of $4.88 per share.

*A non-GAAP measure defined below.

_________________________________

1

Cash balance excluding restricted cash as at March 31, 2022 amounted to $43.3 million as compared to $47.9 million as at December 31, 2021.

2

Net debt excluding restricted cash balance at March 31, 2022 was $126.2 million compared to $122.1 million at December 31, 2021.

Conference Call and Webcast Details

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

Date: Monday, May 9, 2022

Time: 5 p.m. ET

Toll-free dial-in number: (844) 826-3035

International dial-in number: (412) 317-5195

Conference ID: 10166776

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 Group, Inc. 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 p.m. Eastern time on the same day through May 16, 2022.

Toll-free replay number: (844) 512-2921

International replay number: (412) 317-6671

Replay ID: 10166776

About Startek

Startek is a global provider of tech-enabled customer experience (CX) management solutions, digital transformation, and technology services to leading brands. Startek is committed to impacting clients’ business outcomes by enhancing customer experience and digital and AI enablement across all touch points and channels. Startek has more than 43,000 CX experts spread across 38 delivery campuses in 13 countries. The company services over 190 clients across a range of industries, including banking and financial services, insurance, technology, telecom, healthcare, travel and hospitality, e-commerce, consumer goods, retail and energy and utilities. To learn more, 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, 2021, as filed with the Securities and Exchange Commission (SEC) on March 14, 2022, 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

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Revenue

 

 

167,317

 

 

 

163,495

 

Warrant adjustment

 

 

 

 

 

(425

)

Net revenue

 

$

167,317

 

 

$

163,070

 

Cost of services

 

 

(146,260

)

 

 

(138,383

)

Gross profit

 

$

21,057

 

 

$

24,687

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

(15,881

)

 

 

(14,171

)

Impairment losses and restructuring/exit cost

 

 

(1,407

)

 

 

(1,898

)

Operating income

 

$

3,769

 

 

$

8,618

 

 

 

 

 

 

 

 

Share of loss of equity-accounted investees

 

 

(8

)

 

 

(14

)

Interest expense, net and other income

 

 

(974

)

 

 

(13,769

)

Foreign exchange gains (losses), net

 

 

(408

)

 

 

212

 

Income (loss) before tax expense

 

$

2,379

 

 

$

(4,953

)

Tax expenses

 

 

(2,093

)

 

 

(4,902

)

Net income (loss)

 

$

286

 

 

$

(9,855

)

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

$

1,529

 

 

$

2,300

 

Net loss attributable to Startek shareholders

 

$

(1,243

)

 

$

(12,155

)

 

 

 

 

 

 

 

Net loss per common share

 

 

 

 

 

 

Basic net loss attributable to Startek shareholders

 

$

(0.03

)

 

$

(0.30

)

Diluted net loss attributable to Startek shareholders

 

$

(0.03

)

 

$

(0.30

)

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

Basic

 

 

40,338

 

 

 

40,592

 

Diluted

 

 

40,338

 

 

 

40,592

 

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Net income (loss)

 

$

286

 

 

$

(9,855

)

Net income attributable to noncontrolling interests

 

 

1,529

 

 

 

2,300

 

Net loss attributable to Startek shareholders

 

 

(1,243

)

 

 

(12,155

)

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

548

 

 

 

(1,092

)

Change in fair value of derivative instruments

 

 

 

 

 

8

 

Pension amortization

 

 

(1,137

)

 

 

(384

)

Other comprehensive loss

 

$

(589

)

 

$

(1,468

)

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes

 

 

 

 

 

 

Other comprehensive loss attributable to non-controlling interests

 

 

(655

)

 

 

(69

)

Other comprehensive income (loss) attributable to Startek shareholders

 

 

66

 

 

 

(1,399

)

 

 

$

(589

)

 

$

(1,468

)

Comprehensive income (loss)

 

 

 

 

 

 

Comprehensive income attributable to non-controlling interests

 

 

874

 

 

 

2,231

 

Comprehensive loss attributable to Startek shareholders

 

 

(1,177

)

 

 

(13,554

)

 

 

$

(303

)

 

$

(11,323

)

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

March 31,

 

December 31,

 

 

2022

 

2021

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

43,302

 

 

 

47,940

 

Restricted cash

 

 

8,946

 

 

 

7,456

 

Trade accounts receivables, net

 

 

85,542

 

 

 

106,937

 

Unbilled revenue

 

 

67,266

 

 

 

50,074

 

Prepaid and other current assets

 

 

17,720

 

 

 

12,611

 

Total current assets

 

$

222,776

 

 

$

225,018

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment, net

 

 

32,332

 

 

 

34,168

 

Operating lease right-of-use assets

 

 

59,299

 

 

 

63,012

 

Intangible assets, net

 

 

87,531

 

 

 

90,092

 

Goodwill

 

 

183,397

 

 

 

183,397

 

Investment in equity-accounted investees

 

 

31,680

 

 

 

31,688

 

Deferred tax assets, net

 

 

4,731

 

 

 

3,664

 

Prepaid expenses and other non-current assets

 

 

10,805

 

 

 

11,436

 

Total non-current assets

 

$

409,775

 

 

$

417,457

 

Total assets

 

$

632,551

 

 

$

642,475

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade accounts payables

 

 

8,169

 

 

 

11,916

 

Accrued expenses

 

 

53,706

 

 

 

53,203

 

Short term debt

 

 

3,535

 

 

 

3,611

 

Current maturity of long term debt

 

 

10,216

 

 

 

6,241

 

Current maturity of operating lease liabilities

 

 

24,052

 

 

 

24,393

 

Other current liabilities

 

 

44,236

 

 

 

48,265

 

Total current liabilities

 

$

143,914

 

 

$

147,629

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Long term debt

 

 

155,771

 

 

 

160,175

 

Operating lease liabilities

 

 

40,745

 

 

 

44,263

 

Other non-current liabilities

 

 

21,563

 

 

 

19,562

 

Deferred tax liabilities, net

 

 

18,244

 

 

 

17,526

 

Total non-current liabilities

 

$

236,323

 

 

$

241,526

 

Total liabilities

 

$

380,237

 

 

$

389,155

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 40,953,221 and 40,893,396 shares issued as of March 31, 2022, and December 31, 2021, respectively

 

 

410

 

 

 

409

 

Additional paid-in capital

 

 

292,104

 

 

 

291,537

 

Accumulated deficit

 

 

(85,286

)

 

 

(84,043

)

Treasury stock, 672,176 and 412,769 shares as of March 31, 2022, and December 31, 2021, respectively, at cost

 

 

(3,183

)

 

 

(1,912

)

Accumulated other comprehensive loss

 

 

(10,621

)

 

 

(10,687

)

Equity attributable to Startek shareholders

 

$

193,424

 

 

$

195,304

 

Non-controlling interests

 

 

58,890

 

 

 

58,016

 

Total stockholders’ equity

 

$

252,314

 

 

$

253,320

 

Total liabilities and stockholders’ equity

 

$

632,551

 

 

$

642,475

 

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Operating Activities

 

 

 

 

 

 

Net income (loss)

 

$

286

 

 

$

(9,855

)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

7,588

 

 

 

6,803

 

Profit on sale of property, plant and equipment

 

 

(31

)

 

 

(53

)

Provision for doubtful accounts

 

 

(66

)

 

 

63

 

Amortization of debt issuance costs (including loss on extinguishment of debt)

 

 

146

 

 

 

11,241

 

Amortization of call option premium

 

 

360

 

 

 

120

 

Warrant contra revenue

 

 

 

 

 

425

 

Share-based compensation expense

 

 

428

 

 

 

280

 

Deferred income taxes

 

 

(306

)

 

 

558

 

Share of loss of equity-accounted investees

 

 

8

 

 

 

14

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Trade accounts receivables

 

 

21,603

 

 

 

12,848

 

Prepaid expenses and other assets

 

 

(21,397

)

 

 

(5,964

)

Trade accounts payables

 

 

(3,717

)

 

 

(5,447

)

Income taxes, net

 

 

130

 

 

 

2,727

 

Accrued expenses and other liabilities

 

 

(4,467

)

 

 

4,908

 

Net cash generated from operating activities

 

$

564

 

 

$

18,668

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(1,902

)

 

 

(2,922

)

Investment in equity-accounted investees

 

 

 

 

 

(25,000

)

Payments for call option premium

 

 

 

 

 

(3,000

)

Net cash used in investing activities

 

$

(1,902

)

 

$

(30,922

)

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

Proceeds from the issuance of common stock

 

 

140

 

 

 

1,244

 

Proceeds from long term debt (net of debt issuance cost paid to lenders)

 

 

 

 

 

156,525

 

Payments on long term debt

 

 

 

 

 

(117,600

)

Payments for loan fees related to long term debt

 

 

 

 

 

(2,794

)

(Payments on) proceeds from other borrowings, net

 

 

(643

)

 

 

(10,609

)

Common stock repurchase

 

 

(1,271

)

 

 

 

Net cash generated from/ (used in) financing activities

 

$

(1,774

)

 

$

26,766

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(3,112

)

 

 

14,512

 

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

 

 

(36

)

 

 

(425

)

Cash and cash equivalents and restricted cash at beginning of period

 

 

55,396

 

 

 

50,559

 

Cash and cash equivalents and restricted cash at end of period

 

$

52,248

 

 

$

64,646

 

 

 

 

 

 

 

 

Components of cash and cash equivalents and restricted cash

 

 

 

 

 

 

Balance with banks

 

 

43,302

 

 

 

57,665

 

Restricted cash

 

 

8,946

 

 

 

6,981

 

Total cash and cash equivalents and restricted cash

 

$

52,248

 

 

$

64,646

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest and other finance costs

 

 

2,131

 

 

 

14,443

 

Cash paid for income taxes

 

 

2,170

 

 

 

1,652

 

Supplemental disclosure of non-cash activities

 

 

 

 

 

 

Non-cash warrant contra revenue

 

 

 

 

 

425

 

Non-cash share-based compensation expenses

 

 

428

 

 

 

280

 

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, Exchange gain / (loss), net, Depreciation and amortization expense, Restructuring and other acquisition-related costs, 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 the 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 the ongoing operations that we believe are 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 March 31,

 

 

2022

 

2021

Net income (loss)

 

 

286

 

 

(9,855

)

Tax expense

 

 

2,093

 

 

 

4,902

 

Share of loss of equity-accounted investees

 

 

8

 

 

 

14

 

Interest expense, net, and other income

 

 

973

 

 

 

13,769

 

Foreign exchange gains (losses), net

 

 

408

 

 

 

(212

)

Depreciation and amortization expense

 

 

7,588

 

 

 

6,803

 

Private offer transaction cost

 

 

500

 

 

 

 

Impairment losses and restructuring cost

 

 

1,407

 

 

 

1,898

 

Share-based compensation expense

 

 

428

 

 

 

280

 

Warrant contra revenue

 

 

 

 

 

425

 

Adjusted EBITDA

 

$

13,691

 

 

$

18,024

 

Adjusted EPS:

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Loss attributable to Startek shareholders

 

 

(1,243

)

 

 

(12,155

)

Add: Share based compensation expense

 

 

428

 

 

 

280

 

Add: Amortization of intangible assets, net of tax

 

 

2,244

 

 

 

2,243

 

Add: Warrant contra revenue

 

 

 

 

 

425

 

Add: Private offer transaction cost

 

 

500

 

 

 

 

Add: Debt issuance cost expensed out

 

 

 

 

 

10,937

 

Adjusted net income

 

$

1,929

 

 

$

1,730

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

40,338

 

 

 

40,592

 

Weighted average common shares outstanding – diluted

 

 

40,338

 

 

 

40,592

 

 

 

 

 

 

 

 

Adjusted EPS – basic

 

$

0.05

 

 

$

0.04

 

Adjusted EPS – diluted

 

$

0.05

 

 

$

0.04

 

 

Contacts

Investor Relations
Cody Cree

Gateway Group, Inc.

(949) 574-3860

SRT@gatewayir.com

Media Relations
Zainab Boxwala

Startek

zainab.boxwala@startek.com

Author

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