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Startek Reports Record Fourth Quarter 2019 Financial Results

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- Q4 Revenue up 8% to $171.6 Million, with a 48% Increase in Adjusted EBITDA* to $16.8 Million -

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

Fourth Quarter 2019 Financial Results

Net revenue for the quarter increased 8% to $171.6 million compared to $158.6 million in the fourth quarter of 2018.

Gross profit in the fourth quarter was up 10% to $27.6 million compared to $25.1 million in the year ago quarter, with gross margin up 10 basis points to 15.9% compared to 15.8%.

Selling, general and administrative (SG&A) expenses decreased to $19.4 million compared to $21.9 million in the year-ago quarter. As a percentage of revenue, SG&A improved 250 basis points to 11.3% compared to 13.8% in the year-ago quarter.

Net loss attributable to Startek shareholders for the quarter was $5.3 million or $(0.14) per share, compared to a net loss of $9.7 million or $(0.26) per share in the year-ago quarter. Net loss in the fourth quarter of 2019 included a $7.1 million goodwill impairment primarily related to Argentina and South Africa.

Adjusted net income* in the fourth quarter of 2019 was $5.8 million, or $0.15 per share, compared to an adjusted net loss* of $6.9 million or $(0.19) in the fourth quarter of 2018.

Adjusted EBITDA* for the quarter increased 48% to $16.8 million compared to $11.4 million in the year-ago quarter.

At December 31, 2019, cash and restricted cash increased to $32.6 million compared to $24.6 million at December 31, 2018. Total debt at the end of 2019 was reduced to $174.8 million compared to $185.7 million at the end of 2018. This resulted in a reduction of net debt to $142.2 million compared to $161.1 million.

*A non-GAAP measure defined below.

Management Commentary

"2019 marked our first full year as a combined company since the business combination with Aegis, and our exceptional fourth quarter results reflect the strength of our now fully integrated company," said Aparup Sengupta, executive chairman and CEO of Startek. "We delivered on multiple key initiatives over the last year, including execution of our client diversification strategy with high-growth companies, implementing a lean and efficient cost structure across our global operations, and expanding our service offerings to include higher-margin digital solutions that further position Startek as a value-added partner to our clients.

"A key driver of our success in 2019, and especially the strong momentum in the back half of the year, was the buildout of our global leadership team. During the summer, we appointed Rajiv Ahuja to global COO, and under his leadership we added key personnel to implement global best practices, ensuring all of our clients receive a consistent, high-quality experience. In fact, during the fourth quarter we launched a centralized, virtual command center that monitors our customer service activity around the world 24/7.

"Subsequent to the quarter, we made other key additions to our sales and leadership teams, including our new head of global sales, Rick Ferry, and chief technology officer, P S Reddy. Both Rick and Reddy bring unique and relevant skill sets to our organization that will help us position Startek as one of the premier global CX providers for high-growth companies. We are very proud of our accomplishments over the last year, but we are far from done as we look to carry this momentum through 2020 and the years ahead."

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: Thursday, March 12, 2020
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: (844) 239-5283
International dial-in number: (574) 990-1022
Conference ID: 4278589

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.

A telephonic replay of the conference call will also be available after 8:00 p.m. Eastern time on the same day through March 19, 2020.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 4278589

About Startek

Startek is a leading global provider of technology-enabled business process outsourcing solutions. The company provides omni-channel customer experience management, back office and technology services to corporations around the world across a range of industries. The company has more than 47,000 outsourcing experts across 49 delivery campuses worldwide that are committed to delivering transformative customer experience for clients. Services include omni-channel 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-K for the fiscal year ended December 31, 2019, as filed with the 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 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)

Unaudited

Audited

Three Months Ended
December 31, 2019

Three Months Ended
December 31, 2018

Year Ended
December 31, 2019

Nine months ended
December 31, 2018

Revenue

172,151

158,585

659,205

420,317

Warrant Contra Revenue

(565

)

-

(1,295

)

-

Net revenue

171,586

158,586

657,910

420,317

Cost of services

(143,950

)

(133,504

)

(547,014

)

(355,591

)

Gross profit

27,636

25,081

110,896

64,726

Selling, general and administrative expenses

(19,425

)

(21,945

)

(91,363

)

(60,020

)

Impairment losses and restructuring cost

(7,758

)

(1,341

)

(9,827

)

(3,962

)

Acquisition related cost

0

(3,138

)

11

(7,036

)

Operating Profit/ (loss)

453

(1,343

)

9,717

(6,292

)

Share of profit/(loss) of equity-accounted investees

(1,214

)

94

(226

)

115

Interest and other income

417

183

858

616

Interest and other cost

(4,377

)

(4,015

)

(16,682

)

(11,836

)

Exchange gain (loss), net

401

(147

)

(2,157

)

(1,309

)

Profit / (loss) before income taxes

(4,320

)

(5,228

)

(8,490

)

(18,706

)

Tax expenses

Current tax

1,551

2,011

5,892

3,563

Deferred tax (benefit) / expenses

(1,310

)

372

(1,101

)

7

Tax expense

241

2,383

4,791

3,570

Net Income / (loss)

(4,561

)

(7,611

)

(13,281

)

(22,276

)

Net (loss) / income attributable to:

Owners of the parent

(5,291

)

(9,702

)

(15,018

)

(24,312

)

Non controlling interest

730

2,091

1,737

2,036

(4,561

)

(7,611

)

(13,281

)

(22,276

)

Net income (loss) per common share

Basic EPS

(0.14

)

(0.26

)

(0.39

)

(0.80

)

Weighted average common shares outstanding - Basic

38,492

37,105

38,132

30,518

Diluted EPS

(0.14

)

(0.26

)

(0.39

)

(0.80

)

Weighted average common shares outstanding - Diluted

38,492

37,105

38,132

30,518

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Audited)

As of December 31,
2019

As of December 31,
2018

Assets

Current assets

Cash and cash equivalents

20,464

16,617

Restricted cash

12,162

7,952

Trade accounts receivables, net

108,479

107,836

Unbilled revenue

41,449

42,135

Prepaid expenses and other current assets

12,008

18,850

Total current assets

194,562

193,390

Non-current assets

Property, plant and equipment, net

37,507

42,242

Operating lease right-of-use assets

73,692

-

Intangible assets, net

110,807

121,336

Goodwill

219,341

225,450

Investment in equity affiliates

553

2,097

Deferred tax assets, net

5,251

5,048

Prepaid expenses and other non-current assets

16,370

15,076

Total non-current assets

463,521

411,249

Total assets

658,083

604,639

Liabilities and Stockholders’ Equity

Current liabilities

Trade accounts payables

25,449

26,886

Short term debt

26,491

21,975

Current maturity of long term debt

17,601

9,800

Current maturity of operating lease obligation

19,677

-

Current maturity of finance lease obligation

632

1,816

Accrued expenses and other current liabilities

82,598

84,881

Total current liabilities

172,448

145,358

Non-current liabilities

Long term debt

130,144

152,100

Operating lease liabilities

54,341

-

Accrued expenses and other non-current liabilities

11,140

11,907

Deferred tax liabilities, net

18,226

18,901

Total non-current liabilities

213,851

182,908

Total liabilities

386,299

328,266

Stockholders’ equity

Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 38,525,636 and 37,446,323 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively

385

374

Additional paid-in capital

276,827

267,317

Accumulated (deficit) / earnings

(46,145

)

(31,127

)

Accumulated other comprehensive income (loss)

(6,022

)

(5,547

)

Equity attributable to Startek Shareholders

225,045

231,017

Non-controlling interest

46,739

45,356

Total stockholders’ equity

271,784

276,373

Total liabilities and stockholders’ equity

658,083

604,639

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Audited)

Year ended
December 31, 2019

Nine months ended
December 31, 2018

Operating activities

Net Income/(loss)

(13,281

)

(22,276

)

Adjustments to reconcile net income/ (Loss) to net cash provided by (used in) operating activities

Depreciation and amortisation

29,723

20,462

Impairment of goodwill

7,146

Share of profit/(loss) of equity affiliates

226

(115

)

Warrant contra revenue

1,295

-

Impairment /(profit) on sale of PPE

-

483

Share-based compensation expense

1,516

674

Deferred tax (benefit) / expenses

(1,101

)

7

Provision for doubtful accounts

1,640

2,253

Changes in operating assets and liabilities

Trade accounts receivable

(4,492

)

(10,982

)

Prepaid expenses and other assets

4,199

1,643

Trade accounts payable

(734

)

(669

)

Accrued expenses and other current liabilities

962

14,503

Income taxes, net

(542

)

(4,475

)

Net cash provided by operating activities

26,556

1,508

Investing activities

Purchase of property, plant and equipment (net)

(15,564

)

(7,690

)

Cash and cash equivalents acquired on reverse merger

-

1,496

Proceeds from equity-accounted Affiliates

1,308

48

Net cash used in investing activities

(14,256

)

(6,146

)

Financing activities

Proceeds from issuance of common stock

6,710

4,605

Payments on long term debt

(9,800

)

(4,200

)

Proceeds from other debt, net

(858

)

10,555

Dividends paid

-

(3,137

)

Net cash (used-in)/provided by financing activities

(3,948

)

7,823

Net increase/(decrease) in cash and cash equivalents

8,352

3,185

Effect of exchange rate changes on cash and cash equivalents

(295

)

(1,535

)

Cash and cash equivalents at the beginning of period

24,569

22,919

Cash and cash equivalents at the end of period

32,626

24,569

Components of cash and cash equivalents

Cash on hand

9

12

Restricted cash

12,162

7,952

Balance with banks on current account

20,455

16,605

Total cash and cash equivalents

32,626

24,569

Supplemental disclosure of Cash Flow Information

Cash paid for Interest

15,329

9,687

Cash paid for income taxes

6,379

7,654

Non cash warrant contra revenue

1,295

-

Non cash share-based compensation expenses

1,516

674

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 merger related cost, Share-based compensation expense and Warrant contra revenue. 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, 2019

Three months ended
December 31, 2018

Year ended
December 31, 2019

Nine months ended
December 31, 2018

Net Loss

(4,560

)

(7,611

)

(13,281

)

(22,276

)

Income tax expense

241

2,383

4,791

3,570

Interest and other expense, net

4,773

3,886

18,206

12,414

Depreciation and amortization expense

7,667

7,819

29,723

20,462

Restructuring and other merger related cost

7,758

4,479

9,817

10,998

Share-based compensation expense

365

425

1,516

674

Warrant contra revenue

565

-

1,295

-

Adjusted EBITDA

16,808

11,381

52,068

25,842

Adjusted EPS:

Three months ended
December 31, 2019

Three months ended
December 31, 2018

Year ended
December 31, 2019

Nine months ended
December 31, 2018

Net loss attributable to Startek shareholders

(5,291

)

(9,702

)

(15,018

)

(24,312

)

Add: Share based Compensation

365

425

1,516

674

Add: Amortization of Intangible assets

2,279

2,349

8,956

6,095

Add: Warrant contra revenue

565

-

1,295

-

Add: Goodwill impairment loss

7,146

-

7,146

-

Add: Deferred Tax Adjustment

780

-

780

-

Adjusted Net Income / (loss) (non-GAAP)

5,844

(6,928

)

4,675

(17,543

)

Weighted average common shares outstanding - basic

38,492

37,105

38,132

30,518

Adjusted EPS - Basic

0.15

(0.19

)

0.12

(0.57

)

Weighted average common shares outstanding - Diluted

38,492

37,105

38,132

30,518

Adjusted EPS - Diluted

0.15

(0.19

)

0.12

(0.57

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20200312005784/en/

Contacts

Investor Relations
Sean Mansouri, CFA or Cody Slach
Gateway Investor Relations
(949) 574-3860
investor@startek.com