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Startek Reports First Quarter 2021 Financial Results

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- Demand Strength and Operational Momentum Drive Continued Growth Across Net Revenue, Adjusted EBITDA and Adjusted Net Income -

Startek, Inc. (NYSE:SRT) ("Startek" or the "Company"), a global provider of customer experience management solutions, is reporting financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Financial Highlights ($ in millions, excl. margin items)

Q1 2021

Q4 2020

Q1 2020

Net Revenue

$163.1

$174.5

$160.9

Gross Profit

$24.7

$30.9

$20.1

Gross Margin

15.1%

17.7%

12.5%

SG&A Expenses

$14.2

$15.3

$17.3

Net Income/(Loss)[1]

$(12.2)

$(7.6)

$(26.6)

Adjusted Net Income/(Loss)[2], [3]

$1.7

$8.8

$(1.0)

Adjusted EBITDA[3]

$18.0

$23.3

$10.5

[1] Reflects net income (loss) attributable to Startek shareholders.
[2] Reflects Adjusted net income (loss) attributable to Startek shareholders.
[3] Refer to the note below about Non-GAAP financial measures.

Management Commentary

"Our first quarter results demonstrate the continued benefits of the operational improvements and efficiencies we implemented throughout last year," said Aparup Sengupta, Executive Chairman and Global CEO of Startek. "Even though Q1 typically represents a seasonally soft period for our business, we generated year-over-year growth across all financial metrics. In addition to an increase in net revenue, we generated strong expansion across gross profit, gross margin and adjusted EBITDA, which also benefitted from continued grants from some governments during the quarter. We expect our commitment to prudent cost management and flexibly supporting our global client base to propel our progress through the remainder of the year.

"With certain geographies still heavily impacted by the pandemic, as well as the uneven pace of recovery and vaccine access around the world, we have focused on keeping our agents safe while flexibly addressing our clients’ evolving needs. About 65% of our global team is currently working remotely, and we have diligently ensured that they have the resources they need to complete their work. We have continued to optimize the Startek Cloud platform through integrating additional cloud computing, IT service management and automation services, further enhancing the seamlessness of our operations. With these enhanced capabilities, we have improved the flexibility and resilience of our platform, with greater elasticity in how we manage our workforce across our geographies.

"While e-commerce tailwinds are not as heightened as they were during last quarter’s holiday season, they still served as a source of strength for us throughout the first quarter. This is in conjunction with the growth we generated across our healthcare, cable and media verticals, including our recent work to support COVID-19 assistance programs in the United States. The strong start to the year has positioned us to deliver robust growth in the current fiscal year.

"As we look to the rest of 2021, we will keep working to advance our operational momentum through driving additional efficiencies and innovation throughout our organization. We also plan on being at the forefront in supporting government efforts to quell the effects people around the globe are experiencing from COVID-19, which we take lot of pride in. Our thoughts remain with everyone in India and around the world who is contending with the ongoing economic and health impacts of the global pandemic."

First Quarter 2021 Financial Results

Net revenue in the first quarter increased to $163.1 million compared to $160.9 million in the year-ago quarter. The increase was driven by continued client demand strength, particularly within the Company’s e-commerce, healthcare, cable and media verticals. On a constant currency basis, net revenue increased 2.3% compared to the year-ago quarter.

Gross profit in the first quarter increased 23% to $24.7 million compared to $20.1 million in the year-ago quarter. Gross margin increased 260 basis points to 15.1% compared to 12.5% in the year-ago quarter. The increase was primarily driven by the aforementioned strength within Startek’s client base, including a greater revenue mix from high-margin verticals. The margin expansion was also aided by grants received in the first quarter.

Selling, general and administrative (SG&A) expenses in the first quarter decreased to $14.2 million compared to $17.3 million in the year-ago quarter. As a percentage of revenue, SG&A improved 200 basis points to 8.7% compared to 10.7% in the year-ago quarter as a result of the ongoing 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 first quarter improved to $12.2 million or $(0.30) per share, compared to a net loss of $26.6 million or $(0.69) per share in the year-ago quarter. Net loss in the first quarter of 2021 reflects a one-time charge related to expenses associated with the debt refinancing the Company completed in February 2021.

Adjusted net income* in the first quarter improved to $1.7 million or $0.04 per diluted share, compared to an adjusted net loss* of $1.0 million or $(0.02) per share in the year-ago quarter.

Adjusted EBITDA* in the first quarter increased 72% to $18.0 million compared to $10.5 million in the year-ago quarter. The increase was primarily driven by the aforementioned revenue growth and margin expansion and cost reductions.

On March 31, 2021, cash and restricted cash increased to $64.6 million1 compared to $50.6 million at December 31, 2020. The increase was largely driven by improved working capital this quarter relative to previous quarters. Total debt at March 31, 2021 was $172.8 million compared to $136.0 million at December 31, 2020, and net debt at March 31, 2021 was $108.1 million2 compared to $85.4 million at December 31, 2020. The increase primarily reflects the use of proceeds of the refinancing to repay in full the previous senior debt facility and to also make the investment in CSS.

*A non-GAAP measure defined below.

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, May 10, 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: 4684167

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 May 17, 2021.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 4684167

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 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, 2020, as filed with the Securities and Exchange Commission (SEC) on March 15, 2021, 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,

2021

2020

Revenue

163,495

161,177

Warrant contra revenue

(425

)

(278

)

Net Revenue

$

163,070

$

160,899

Cost of services

(138,383

)

(140,841

)

Gross profit

$

24,687

$

20,058

Selling, general and administrative expenses

(14,171

)

(17,255

)

Impairment losses and restructuring/exit cost

(1,898

)

(24,322

)

Operating income / (loss)

$

8,618

$

(21,519

)

Share of loss of equity-accounted investees

(14

)

(8

)

Interest expense, net

(13,769

)

(3,506

)

Exchange gain / (loss), net

212

1,928

Loss before income taxes

$

(4,953

)

$

(23,105

)

Income tax expense

(4,902

)

(2,876

)

Net loss

$

(9,855

)

$

(25,981

)

Net income / (loss)

Net income attributable to non-controlling interests

2,300

576

Net loss attributable to Startek shareholders

(12,155

)

(26,557

)

Net loss per common share - basic and diluted

(0.30

)

(0.69

)

Weighted average common shares outstanding - basic and diluted

40,592

38,528

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended March 31,

2021

2020

Net loss

$

(9,855

)

$

(25,981

)

Net income attributable to non-controlling interests

2,300

576

Net loss attributable to Startek shareholders

(12,155

)

(26,557

)

Other comprehensive (loss) / income, net of taxes:

Foreign currency translation adjustments

(1,092

)

(4,392

)

Change in fair value of derivative instruments

8

(672

)

Pension amortization

(384

)

396

Other comprehensive loss

$

(1,468

)

$

(4,668

)

Other comprehensive (loss) / income, net of taxes

Other comprehensive (loss) / income attributable to non-controlling interests

(69

)

163

Other comprehensive loss attributable to Startek shareholders

(1,399

)

(4,831

)

$

(1,468

)

$

(4,668

)

Comprehensive (loss) / income

Comprehensive income attributable to non-controlling interests

2,231

739

Comprehensive loss attributable to Startek shareholders

(13,554

)

(31,388

)

$

(11,323

)

$

(30,649

)

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

March 31,

December 31,

2021

2020

Assets

Current assets

Cash and cash equivalents

57,665

44,507

Restricted cash

6,981

6,052

Trade accounts receivable, net

69,712

83,560

Unbilled revenue

57,530

49,779

Prepaid and other current assets

12,328

14,542

Total current assets

$

204,216

$

198,440

Non-current assets

Property, plant and equipment, net

34,353

34,225

Operating lease right-of-use assets

65,396

69,376

Intangible assets, net

97,879

100,440

Goodwill

183,397

183,397

Investment in equity-accounted investees

25,096

111

Deferred tax assets, net

4,042

5,294

Prepaid expenses and other non-current assets

16,605

13,370

Total non-current assets

$

426,768

$

406,213

Total assets

$

630,984

$

604,653

Liabilities and Shareholders' Equity

Current liabilities

Trade accounts payables

14,457

20,074

Accrued expenses

58,026

57,118

Short term debt

5,230

15,505

Current maturity of long term debt

2,412

2,180

Current maturity of operating lease obligation

18,724

19,327

Other current liabilities

45,130

39,987

Total current liabilities

$

143,979

$

154,191

Non-current liabilities

Long term debt

165,116

118,315

Operating lease liabilities

48,697

52,052

Other non-current liabilities

18,490

15,498

Deferred tax liabilities, net

17,194

17,715

Total non-current liabilities

$

249,497

$

203,580

Total liabilities

$

393,476

$

357,771

Stockholders’ equity:

Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 40,781,804 and 40,453,462 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

408

405

Additional paid-in capital

290,646

288,700

Accumulated deficit

(97,698

)

(85,543

)

Accumulated other comprehensive loss

(8,685

)

(7,286

)

Equity attributable to Startek shareholders

$

184,671

$

196,276

Non-controlling interests

52,837

50,606

Total stockholders’ equity

$

237,508

$

246,882

Total liabilities and stockholders’ equity

$

630,984

$

604,653

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended March 31,

2021

2020

Operating Activities

Net loss

$

(9,855

)

$

(25,981

)

Adjustments to reconcile net loss to net cash generated from operating activities:

Depreciation and amortization

6,803

7,093

Impairment of goodwill

-

22,708

Profit on sale of property, plant and equipment

(53

)

-

Provision for doubtful accounts

63

154

Amortisation of debt issuance cost

2,670

378

Warrant contra revenue

425

278

Share-based compensation expense

280

291

Deferred income taxes

558

1,879

Share of loss of equity-accounted investees

14

8

Changes in operating assets and liabilities:

Trade accounts receivable

12,848

4,503

Prepaid expenses and other assets

(8,844

)

(7,658

)

Trade accounts payable

(5,447

)

(4,722

)

Income taxes, net

2,727

(672

)

Accrued expenses and other current liabilities

4,908

12,287

Net cash generated from operating activities

$

7,097

$

10,546

Investing Activities

Purchases of property, plant and equipment

(2,922

)

(2,884

)

Investment in equity-accounted investees

(25,000

)

-

Net cash used in investing activities

$

(27,922

)

$

(2,884

)

Financing Activities

Proceeds from the issuance of common stock

1,244

43

Proceeds from (payments on) long term debt

44,702

(4,200

)

Proceeds from (payments on) other debt, net

(10,609

)

4,578

Net cash generated from financing activities

$

35,337

$

421

Net increase in cash and cash equivalents

14,512

8,083

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

(425

)

(1,052

)

Cash and cash equivalents and restricted cash at beginning of period

50,559

32,626

Cash and cash equivalents and restricted cash at end of period

$

64,646

$

39,657

Components of cash and cash equivalents and restricted cash

Balances with banks

57,665

27,795

Restricted cash

6,981

11,862

Total cash and cash equivalents and restricted cash

$

64,646

$

39,657

Supplemental disclosure of Cash Flow Information

Cash paid for Interest and other finance costs

14,443

1,988

Cash paid for income taxes

1,652

963

Non-cash warrant contra revenue

425

278

Non-cash share-based compensation expenses

280

291

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 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 March 31,

2021

2020

Net loss

$

(9,855

)

$

(25,981

)

Income tax expense

4,902

2,876

Interest and other expense, net

13,783

3,514

Exchange gain/(loss), net

(212

)

(1,928

)

Depreciation and amortization expense

6,803

7,093

Impairment losses and restructuring cost

1,898

24,322

Share-based compensation expense

280

291

Warrant contra revenue

425

278

Adjusted EBITDA

$

18,024

$

10,465

Adjusted EPS:

Three Months Ended March 31,

2021

2020

Net loss attributable to Startek shareholders

$

(12,155

)

$

(26,557

)

Add: Share based compensation expense

280

291

Add: Amortization of intangible assets, net of tax

2,243

2,261

Add: Warrant contra revenue

425

278

Add: Goodwill impairment loss

-

22,708

Add: Debt issuance cost

10,937

-

Adjusted net income / (loss) (non-GAAP)

$

1,730

$

(1,019

)

Weighted average common shares outstanding - Basic & Diluted

40,592

38,528

Adjusted EPS - Basic and Diluted

0.04

(0.02

)

1 Cash balance excluding restricted cash as at March 31, 2021 amounted to $57.7 million as compared to $44.5 million as at December 31, 2020.
2 Net debt excluding restricted cash balance at March 31, 2021 was $115.1 million compared to $91.5 million at December 31, 2020.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210510005649/en/

Contacts

Investor Relations
Cody Cree or Jackie Keshner
Gateway Investor Relations
(949) 574-3860
SRT@gatewayir.com

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