Startek, Inc. SRT, a global provider of customer experience management, is reporting financial results for the quarter and nine months ended December 31, 2018.
Financial Results
The results presented for the quarter ended December 31, 2018 include both Startek and Aegis results from October 1, 2018 to December 31, 2018. 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 September 30, 2018 include Startek results from July 20, 2018 to September 30, 2018, combined with Aegis results from July 1, 2018 to September 30, 2018. The results presented for the quarter ended December 31, 2017 include only Aegis results from October 1, 2017 to December 31, 2017. The balance sheet results presented for March 31, 2018 include only Aegis results as well.
The business combination of Startek and Aegis resulted in a change in fiscal year-end from December 31 to March 31, which is the fiscal year-end of Aegis. On October 5, 2018, the Startek Board of Directors voted to change the fiscal year-end back to December 31. The company will file a transitional report on Form 10-KT for the nine months ended December 31, 2018.
Total revenue for the quarter increased 5% to $158.6 million compared to $151.5 million in the quarter ended September 30, 2018, and was up 21% compared to $130.7 million in the quarter ended December 31, 2017.
Gross profit for the quarter increased 10% to $25.1 million compared to $22.8 million in the quarter ended September 30, 2018, and was up 72% compared to $14.5 million in the quarter ended December 31, 2017.
Gross margin was 15.8% during the quarter compared to 15.0% in the quarter ended September 30, 2018 and 11.1% in the quarter ended December 31, 2017.
Selling, general and administrative (SG&A) expenses were $21.9 million compared to $22.8 million in the quarter ended September 30, 2018, and $7.1 million in the year-ago quarter. As a percentage of revenue, SG&A was 13.8% compared to 15.1% in the quarter ended September 30, 2018 and 5.5% in the year-ago quarter.
Net loss attributable to Startek shareholders for the quarter was $9.7 million or $(0.26) per share, compared to a net loss of $10.9 million or $(0.32) per share in the quarter ended September 30, 2018, and a net loss of $2.4 million or $(0.12) per share in the year-ago quarter.
Adjusted EBITDA* for the quarter increased 40% to $11.4 million compared to $8.1 million in the quarter ended September 30, 2018. Adjusted EBITDA* for the year-ago quarter was $12.3 million.
At December 31, 2018, the company's cash position was $24.6 million compared to $20.5 million at September 30, 2018 and $22.9 million at March 31, 2018. Startek closed the quarter with gross debt of $185.7 million compared to $178.3 million at September 30, 2018 and $151.0 million outstanding at March 31, 2018.
*A non-GAAP measure defined below.
Management Commentary
"The Startek and Aegis integration is largely complete and led to a very strong quarter of both operational performance and business development," said Lance Rosenzweig, president & global CEO of Startek. "We also continued to make strides in diversifying our vertical concentration and revenue mix despite the ongoing headwinds in global telecom. In fact, as a result of our growing next-gen retail client base, we experienced some of the strongest holiday volumes ever seen by the company.
"Our post-merger integration team continues to identify cost synergies, while also executing on cross-sell opportunities with our expanded geography and service capabilities. Given several new client programs and an accelerating pipeline, we added to our capacity with the opening of a third delivery campus in Honduras in early 2019.
"Subsequent to the quarter, we strengthened our board of directors with the appointments of Julie Schoenfeld and Albert Aboody, each of whom brings unique and relevant skill sets to the board. Julie is a proven technology executive with decades of experience in leading growth companies, while Albert is an accounting industry veteran who served as a senior partner at KPMG for most of his career.
"Looking ahead, we will continue to identify revenue and cost synergies, while focusing our business development efforts in high-growth verticals such as technology, financial services, next-gen retail, healthcare and travel. We also expect to ramp our technology investments in 2019, while reducing our net debt position and strengthening the balance sheet. Given our strengthening sales pipeline, we remain well positioned to execute on our growth initiatives and look forward to carrying this momentum through the year."
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, March 13, 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: 6268337
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 Liolios 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 March 20, 2019.
Toll-free replay number: (855) 859-2056
International replay
number: (404) 537-3406
Replay ID: 6268337
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 approximately 47,500 outsourcing experts across 58 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 Definitive Proxy Statement filed with the Securities and Exchange Commission on June 13, 2018, 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 | ||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||
|
(In thousands, except per share data) |
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|
(Unaudited) |
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|
Three Months Ended December 31, |
Nine Months Ended |
Successor* |
Predecessor* |
|||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||
| Revenue | $ | 158,585 | $ | 130,667 | $ | 420,317 | $ | 169,957 | $ | 310,120 | ||||||||||||
| Cost of services | $ | 133,504 | 116,119 | $ | 355,591 | $ | 143,918 | $ | 265,770 | |||||||||||||
| Gross profit | 25,081 | 14,548 | 64,726 | 26,039 | 44,350 | |||||||||||||||||
| Selling, general and administrative expenses | 21,945 | 7,124 | 60,020 | 15,925 | 32,105 | |||||||||||||||||
| Transaction related fees | 3,138 | 3,712 | 7,036 | 7,994 | 107 | |||||||||||||||||
| Impairment losses and restructuring charges, net | 1,341 | — | 3,962 | 1,868 | — | |||||||||||||||||
| Operating income (loss) | (1,343 | ) | 3,712 | (6,292 | ) | 252 | 12,138 | |||||||||||||||
| Share of profit of equity affiliates | 94 | 134 | 115 | 76 | 996 | |||||||||||||||||
| Interest and other expense, net | 3,979 | 2,317 | 12,529 | 3,858 | 4,581 | |||||||||||||||||
| Income (loss) before income taxes | (5,229 | ) | 1,529 | (18,706 | ) | (3,530 | ) | 8,553 | ||||||||||||||
| Income tax expense | 2,383 | 1,722 | 3,570 | 1,305 | 3,178 | |||||||||||||||||
| Net income (loss) | $ | (7,611 | ) | $ | (193 | ) | $ | (22,276 | ) | $ | (4,835 | ) | $ | 5,375 | ||||||||
| Net income (loss) attributable to non-controlling interests | 2,091 | 2,184 | 2,036 | 1,980 | 2,712 | |||||||||||||||||
| Net income (loss) attributable to Startek shareholders | $ | (9,702 | ) | $ | (2,377 | ) | $ | (24,312 | ) | $ | (6,815 | ) | $ | 2,663 | ||||||||
| Net income (loss) per common share - basic | $ | (0.26 | ) | $ | (0.12 | ) | $ | (0.80 | ) | $ | (0.33 | ) | $ | 0.13 | ||||||||
| Weighted average common shares outstanding - basic | 37,105 | 20,600 | 30,518 | 20,600 | 20,600 | |||||||||||||||||
| Net income (loss) per common share - diluted | $ | (0.26 | ) | $ | (0.12 | ) | $ | (0.80 | ) | $ | (0.33 | ) | $ | 0.13 | ||||||||
| Weighted average common shares outstanding - diluted | 37,105 | 20,600 | 30,518 | 20,600 | 20,600 | |||||||||||||||||
* The consolidated financial statements for March 2018 has been prepared on "Successor" and "Predecessor" basis. For periods prior to the ESMHL and its Subsidiaries acquisition by Aegis, the company is referred to as the "Predecessor" and for periods after the acquisition, it is referred to as the "Successor."
| STARTEK, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
|
(In thousands) |
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|
(Unaudited) |
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| As of December 31, | As of March 31, | ||||||||
| 2018 | 2018 | ||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 16,617 | $ | 17,693 | |||||
| Restricted cash | 7,952 | 5,226 | |||||||
| Trade accounts receivable, net | 107,836 | 63,138 | |||||||
| Prepaid expenses and other current assets | 60,985 | 66,179 | |||||||
| Total current assets | 193,390 | 152,236 | |||||||
| Property, plant and equipment, net | 42,242 | 36,726 | |||||||
| Intangible assets, net | 126,384 | 103,888 | |||||||
| Goodwill | 225,450 | 153,368 | |||||||
| Other non-current assets | $ | 17,173 | $ | 20,423 | |||||
| Total assets | $ | 604,639 | $ | 466,641 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities | 145,358 | 117,966 | |||||||
| Deferred tax liabilities | 18,901 | 17,711 | |||||||
| Long term debt | 152,100 | 127,133 | |||||||
| Accrued expenses and other non-current liabilities | 11,907 | 9,686 | |||||||
| Total liabilities | 328,266 | 272,496 | |||||||
| Equity attributable to Startek shareholders | 231,017 | 146,693 | |||||||
| Non-controlling interest | 45,356 | 47,452 | |||||||
| Total stockholders' equity | 276,373 | 194,145 | |||||||
| Total liabilities and stockholders' equity | $ | 604,639 | $ | 466,641 | |||||
| STARTEK, INC. AND SUBSIDIARIES | |||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
|
(In thousands) |
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|
(Unaudited) |
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|
|
Nine months ended |
Successor * |
Predecessor * |
||||||||||||
| Operating Activities | |||||||||||||||
| Net income (loss) | $ | (22,276 | ) | $ | (4,835 | ) | $ | 5,375 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||
| Depreciation and amortization | 20,462 | 8,184 | 11,603 | ||||||||||||
| Provision for doubtful accounts | 2,253 | 216 | 158 | ||||||||||||
| Impairment of PPE | 483 | ||||||||||||||
| Share-based compensation expense | 674 | — | — | ||||||||||||
| Deferred income taxes | 7 | (909 | ) | (74 | ) | ||||||||||
| Share of profit of equity affiliates | (115 | ) | (76 | ) | (996 | ) | |||||||||
| Unrealised exchange gains and losses (net) | — | (639 | ) | 230 | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||
| Trade accounts receivable, net | (10,982 | ) | (3,995 | ) | 5,392 | ||||||||||
| Prepaid expenses and other assets | 1,643 | 12,599 | (21,507 | ) | |||||||||||
| Trade accounts payable | (669 | ) | (702 | ) | 4,459 | ||||||||||
| Income taxes, net | (4,475 | ) | (1,951 | ) | (2,775 | ) | |||||||||
| Accrued and other liabilities | 14,503 | (13,571 | ) | 18,410 | |||||||||||
| Net cash provided by (used in) operating activities | 1,508 | (5,679 | ) | 20,275 | |||||||||||
| Investing Activities | |||||||||||||||
| Purchases of property, plant and equipment, net | (7,690 | ) | (1,490 | ) | (7,587 | ) | |||||||||
| Proceeds/(Payment) for margin money deposits | (2,865 | ) | (2,044 | ) | 544 | ||||||||||
| Payment for acquisition, net of cash acquired | — | (258,643 | ) | — | |||||||||||
| Proceeds from equity-accounted investee | 48 | — | 1,438 | ||||||||||||
| Cash acquired in Aegis Transactions | 1,496 | — | — | ||||||||||||
| Net cash used in investing activities | (9,011 | ) | (262,177 | ) | (5,605 | ) | |||||||||
| Financing Activities | |||||||||||||||
| Proceeds from the issuance of common stock | 4,605 | 153,910 | — | ||||||||||||
| Proceeds (payments) on long term debt | (4,200 | ) | 132,730 | (1,233 | ) | ||||||||||
| Dividends paid | (3,137 | ) | — | (8,750 | ) | ||||||||||
| Proceeds from other debts, net | 10,555 | (1,414 | ) | 915 | |||||||||||
| Net cash provided by financing activities | 7,823 | 285,226 | (9,068 | ) | |||||||||||
| Net increase in cash and cash equivalents | 320 | 17,370 | 5,602 | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,396 | ) | 323 | (30 | ) | ||||||||||
| Cash and cash equivalents at beginning of period | $ | 17,693 | $ | — | $ | 15,785 | |||||||||
| Cash and cash equivalents at end of period | $ | 16,617 | $ | 17,693 | $ | 21,357 | |||||||||
* The consolidated financial statements for March 2018 has been prepared
on "Successor" and "Predecessor" basis. For periods prior to the ESMHL
and its Subsidiaries acquisition by Aegis, the company is referred to as
the "Predecessor" and for periods after the acquisition, it is referred
to as the "Successor."
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 Operating income (loss) plus Impairment losses and restructuring charges, net, Depreciation and amortization expense, Share-based compensation expense, Transaction related fees, 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.
|
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| Operating Income (Loss) | $ | (1,343 | ) | $ | 3,712 | $ | (6,292 | ) | $ | 13,437 | |||||||||
| Transaction related fees | $ | 3,138 | $ | 3,712 | $ | 7,036 | $ | 3,712 | |||||||||||
| Impairment losses and restructuring charges, net | $ | 1,341 | — | $ | 3,962 | — | |||||||||||||
| Depreciation and amortization expenses | $ | 7,819 | $ | 4,839 | $ | 20,462 | $ | 13,538 | |||||||||||
| Share-based compensation expenses | $ | 425 | — | $ | 674 | — | |||||||||||||
| Adjusted EBITDA | $ | 11,380 | $ | 12,263 | $ | 25,842 | $ | 30,687 | |||||||||||
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