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Startek Reports Quarterly Financial Results

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Startek, Inc. (NYSE:SRT), a global provider of customer experience
management solutions, is reporting financial results for the quarter
ended March 31, 2019.

Financial Results

The results presented for the quarter ended March 31, 2019 and December
31, 2018 include both Startek and Aegis financial results. 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 March 31, 2018 include only Aegis financial results.

Total revenue for the quarter increased 2% to $161.1 million compared to
$158.6 million in the quarter ended December 31, 2018, and was up 40%
compared to $115.1 million in the quarter ended March 31, 2018.

Gross profit for the quarter increased 9% to $27.2 million compared to
$25.1 million in the quarter ended December 31, 2018, and was up 29%
compared to $21.2 million in the quarter ended March 31, 2018.

Gross margin was 16.9% during the quarter compared to 15.8% in the
quarter ended December 31, 2018 and 18.4% in the quarter ended March 31,
2018.

Selling, general and administrative (SG&A) expenses were $24.1 million
compared to $21.9 million in the quarter ended December 31, 2018, and
$14.4 million in the year-ago quarter. As a percentage of revenue, SG&A
was 14.9% compared to 13.8% in the quarter ended December 31, 2018 and
12.5% in the year-ago quarter.

Net loss attributable to Startek shareholders for the quarter was $3.3
million or $(0.09) per share, compared to a net loss of $9.7 million or
$(0.26) per share in the quarter ended December 31, 2018, and a net loss
of $6.2 million or $(0.30) per share in the year-ago quarter.

Adjusted EBITDA* for the quarter was $10.9 million compared to $11.4
million in the quarter ended December 31, 2018. Adjusted EBITDA* for the
year-ago quarter was $12.8 million.

*A non-GAAP measure defined below.

Management Commentary

"The momentum in our business from the end of 2018 has carried into the
first quarter," said Lance Rosenzweig, president & global CEO of
Startek. "While the first quarter typically takes a step back from Q4
due to seasonality, Startek managed to grow revenue during this period
due to the continued ramp of both new and existing client programs
across multiple geographies. We also generated a strong sequential
improvement in gross margin, largely driven by our new client-centric
management model and continued focus on serving high-growth verticals
such as technology, financial services, next-gen retail, healthcare and
travel. We have now consistently expanded margins each quarter since the
business combination last year.

"Subsequent to the quarter, Startek received multiple accolades for our
digital transformation efforts and CX management. In early April, we
received the Top 50 Digital Edge Award from CIO Executive Council and
IDG for our innovative proprietary IT helpdesk chatbot. And just last
week, we were named to the 2019 Best of the Global Outsourcing 100 list
by IAOP for our performance across several categories, including
leadership and top innovation. Receiving these awards and being
recognized as a leader in digital transformation is a major
accomplishment for our team and further solidifies our position as an
industry-leading CX services provider.

"As we look ahead, we will continue to focus on delivering best-in-class
omnichannel solutions and implementing transformative technologies to
help our clients better engage with their customers. We will also
continue to reinvest in our business from a sales, marketing and
technology perspective to bolster our growing pipeline and ensure we are
continuously driving innovation to better serve our clients. With strong
momentum at our back, we remain committed to delivering revenue growth
and margin expansion in 2019."

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, May 8, 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: 8554778

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 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 May 15, 2019.

Toll-free replay number: (855) 859-2056
International replay
number: (404) 537-3406
Replay ID: 8554778

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 more than 45,000 outsourcing experts across 54 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 Form 10-KT
for the fiscal year ended December 31, 2018, as filed with the SEC on
March 14, 2019, 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 
 
Three Months Ended March 31,
2019   2018
Revenue $ 161,142 $ 115,095
Cost of services 133,928   93,938  
Gross profit 27,214 21,157
Selling, general and administrative expenses 24,079 14,405
Restructuring and other merger related cost 1,093   6,257  
Operating income (loss) 2,042 495
Interest and other expense, net (4,814 )   (5,343 )
Income (loss) before income taxes (2,772 ) (4,848 )
Income tax expense 385     332  
Net income (loss) $ (3,157 )   $ (5,180 )
Net income (loss) attributable to non-controlling interests 189     972  
Net income (loss) attributable to Startek shareholders $ (3,346 )   $ (6,152 )
 
Net loss per common share - basic and diluted $ $ 0.00
Weighted average common shares outstanding - basic and diluted 37,522,499 20,600,000
         
 

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
 
March 31, 2019 December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 14,595 $ 16,617
Restricted cash 11,093 7,952
Trade accounts receivable, net 102,548 107,836
Prepaid expenses and other current assets 67,953 60,985
Total current assets 196,189 193,390
Property, plant and equipment, net 41,638 42,242
Right-of-use assets 76,983
Intangible assets, net 118,726 121,336
Goodwill 226,505 225,450
Other non-current assets 24,077 22,221
Total assets $ 684,118 $ 604,639
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 173,273 145,358
Long term debt 149,582 152,100
Operating lease liabilities 55,016
Other non-current liabilities 31,413 30,808
Total liabilities $ 409,284 $ 328,266
Equity attributable to Startek shareholders 229,203 231,017
Non-controlling interest 45,631 45,356
Total stockholders' equity $ 274,834 $ 276,373
Total liabilities and stockholders' equity $ 684,118 $ 604,639
     
 

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
 
Three Months Ended March 31,
2019   2018
Operating Activities
Net income (loss) $ (3,157 ) $ (5,180 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 7,304 6,025
Provision for doubtful accounts 630 374
Share-based compensation expense 425
Deferred tax (benefit) / expenses (659 ) (918 )
Share of profit of affiliates (342 ) (64 )
Profit on sale of property, plant and equipment (251 )
Changes in operating assets & liabilities and other, net (4,327 ) 3,521  
Net cash provided by operating activities $ (377 ) $ 3,758
 
Investing Activities
Purchases of property, plant and equipment (3,495 ) (2,919 )
Distributions received from affiliates   22  
Net cash used in investing activities $ (3,495 ) $ (2,897 )
 
Financing Activities
(Payments) proceeds on long term debt (1,400 )
Proceeds from other debts, net 6,617   488  
Net cash provided by financing activities $ 5,217 $ 488
Effect of exchange rate changes on cash and cash equivalents and
restricted cash
(226 ) (31 )
Net (decrease) increase in cash and cash equivalents and restricted
cash
1,119 1,318
Cash and cash equivalents and restricted cash at beginning of period $ 24,569   $ 21,601  
Cash and cash equivalents and restricted cash at end of period $ 25,688   $ 22,919  
 
 

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 merger 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.

     
Three Months Ended March 31,
2019   2018
Net loss $ (3,157 ) $ (5,180 )
Income tax expense 385 332
Interest and other expense, net 4,814 5,343
Depreciation and amortization expense 7,304 6,025
Restructuring and other merger related cost 1,093 6,257
Share-based compensation expense 425      
Adjusted EBITDA $ 10,864     $ 12,777  

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