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Startek Reports Quarterly Financial Results
Financial Results
The results presented for the quarter ended
Total revenue for the quarter increased 3% to
Gross profit for the quarter increased 3% to
Gross margin increased 10 basis points to 17.3% during the quarter compared to 17.2% in the quarter ended
Selling, general and administrative (SG&A) expenses were
Net loss attributable to
Adjusted EBITDA* for the quarter increased 21% to
*A non-GAAP measure defined below.
Management Commentary
“Our third quarter was one of the strongest in
“During the quarter, we rebranded Aegis and are now officially going to market globally as
“As we close out the year and look to 2020, we will continue to focus on serving as a value-added partner to our clients, and not merely a vendor delivering outsourced support. We will also continue building upon our client diversification strategy, which is primarily targeting prospects in high-growth verticals such as education, financial services, healthcare and next-gen retail, but also growth companies in established verticals like global telecom or media and cable. Our global sales pipeline is robust, and the best years for
Conference Call and Webcast Details
Date:
Time:
Toll-free dial-in number: (844) 239-5283
International dial-in number: (574) 990-1022
Conference ID: 8491158
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The conference call will also be broadcast live and available for replay here.
A replay of the conference call will be available after
Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 8491158
About
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, INC. AND SUBSIDIARIES | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||
| Revenue |
164,630 |
|
151,509 |
|
487,054 |
|
376,827 |
|
||||
| Warrant contra revenue |
- |
|
- |
|
(730 |
) |
- |
|
||||
| Net Revenue |
164,630 |
|
151,509 |
|
486,324 |
|
376,827 |
|
||||
| Cost of services |
(136,142 |
) |
(128,747 |
) |
(403,064 |
) |
(316,025 |
) |
||||
| Gross profit |
28,488 |
|
22,762 |
|
83,260 |
|
60,802 |
|
||||
| Selling, general and administrative expenses |
(22,926 |
) |
(22,818 |
) |
(71,938 |
) |
(52,480 |
) |
||||
| Restructuring and other acquisition related cost |
(220 |
) |
(6,519 |
) |
(2,058 |
) |
(12,776 |
) |
||||
| Operating income/ (loss) |
5,342 |
|
(6,575 |
) |
9,264 |
|
(4,454 |
) |
||||
| Share of profit / (loss) of associates |
(16 |
) |
47 |
|
988 |
|
86 |
|
||||
| Interest expense, net |
(3,372 |
) |
(4,114 |
) |
(11,864 |
) |
(11,518 |
) |
||||
| Exchange gain / (loss), net |
(1,880 |
) |
705 |
|
(2,558 |
) |
(2,441 |
) |
||||
| Profit/(Loss) before income taxes |
74 |
|
(9,937 |
) |
(4,170 |
) |
(18,327 |
) |
||||
| Income tax expense |
3,436 |
|
953 |
|
4,550 |
|
1,519 |
|
||||
| Net loss |
(3,362 |
) |
(10,890 |
) |
(8,720 |
) |
(19,846 |
) |
||||
| Net income/(loss) attributable to non-controlling interests |
(575 |
) |
11 |
|
1,007 |
|
916 |
|
||||
| Net loss attributable to Startek shareholders |
(2,787 |
) |
(10,901 |
) |
(9,727 |
) |
(20,762 |
) |
||||
| Other comprehensive income (loss), net of tax: | ||||||||||||
| Foreign currency translation adjustments |
(1,899 |
) |
(2,049 |
) |
(1,299 |
) |
(5,528 |
) |
||||
| Change in fair value of derivative instruments |
(298 |
) |
(562 |
) |
50 |
|
(562 |
) |
||||
| Pension amortization |
(9 |
) |
(483 |
) |
(70 |
) |
(1,263 |
) |
||||
| Comprehensive loss |
(5,568 |
) |
(13,984 |
) |
(10,039 |
) |
(27,199 |
) |
||||
| Comprehensive income (loss) attributable to non-controlling interests |
(594 |
) |
(251 |
) |
962 |
|
297 |
|
||||
| Comprehensive loss attributable to Startek shareholders |
(4,974 |
) |
(13,733 |
) |
(11,001 |
) |
(27,496 |
) |
||||
| Net loss per common share - basic and diluted |
(0.07 |
) |
(0.32 |
) |
(0.26 |
) |
(0.76 |
) |
||||
| Weighted average common shares outstanding - basic and diluted |
38,467 |
|
33,812 |
|
38,011 |
|
27,289 |
|
||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (In thousands, except per share amounts) | ||||||
| (Unaudited) | ||||||
|
September 30, |
December 31, |
|||||
|
2019 |
|
2018 |
|
|||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents |
17,795 |
|
16,617 |
|
||
| Restricted cash |
10,582 |
|
7,952 |
|
||
| Trade accounts receivable, net |
105,574 |
|
107,836 |
|
||
| Unbilled Revenue |
42,814 |
|
42,135 |
|
||
| Prepaid and other current assets |
15,082 |
|
18,850 |
|
||
| Total current assets |
191,847 |
|
193,390 |
|
||
| Property, plant and equipment, net |
35,745 |
|
42,242 |
|
||
| Operating lease Right-of-use assets |
66,647 |
|
- |
|
||
| Intangible assets, net |
113,410 |
|
121,336 |
|
||
| Goodwill |
226,513 |
|
225,450 |
|
||
| Investment in associates |
1,739 |
|
2,097 |
|
||
| Deferred tax assets, net |
5,052 |
|
5,048 |
|
||
| Prepaid expenses and other non-current assets |
18,761 |
|
15,076 |
|
||
| Total assets |
659,714 |
|
604,639 |
|
||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Trade accounts payable |
20,965 |
|
26,886 |
|
||
| Accrued expenses and other current liabilities |
79,805 |
|
84,881 |
|
||
| Short term debt |
25,213 |
|
21,975 |
|
||
| Current maturity of long term debt |
16,900 |
|
9,800 |
|
||
| Current maturity of operating lease liabilities |
19,838 |
|
- |
|
||
| Current maturity of finance lease obligations |
658 |
|
1,816 |
|
||
| Total current liabilities |
163,379 |
|
145,358 |
|
||
| Long term debt |
141,632 |
|
152,100 |
|
||
| Operating lease liabilities |
47,782 |
|
- |
|
||
| Other non-current liabilities |
12,581 |
|
11,907 |
|
||
| Deferred tax liabilities, net |
19,562 |
|
18,901 |
|
||
| Total liabilities |
384,936 |
|
328,266 |
|
||
| Commitments and contingencies | — | — | ||||
| Stockholders’ equity: | ||||||
| Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 38,483,025 and 37,446,323 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively |
385 |
|
374 |
|
||
| Additional paid-in capital |
275,750 |
|
267,317 |
|
||
| Accumulated other comprehensive loss |
(6,821 |
) |
(5,547 |
) |
||
| Accumulated deficit |
(40,854 |
) |
(31,127 |
) |
||
| Equity attributable to Startek shareholders |
228,460 |
|
231,017 |
|
||
| Non-controlling interest |
46,318 |
|
45,356 |
|
||
| Total stockholders’ equity |
274,778 |
|
276,373 |
|
||
| Total liabilities and stockholders’ equity |
659,714 |
|
604,639 |
|
||
| STARTEK, INC. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| (In thousands, except per share amounts) | ||||||
| (Unaudited) | ||||||
|
Nine Months Ended September 30, |
||||||
|
2019 |
|
2018 |
|
|||
| Operating Activities | ||||||
| Net loss |
$ (8,720 |
) |
$ (19,846 |
) |
||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
| Depreciation and amortization |
22,056 |
|
18,668 |
|
||
| Profit on sale of property, plant and equipment |
(223 |
) |
- |
|
||
| Provision for doubtful accounts |
1,238 |
|
2,100 |
|
||
| Warrant contra revenue |
730 |
|
- |
|
||
| Share-based compensation expense |
1,151 |
|
249 |
|
||
| Deferred income taxes |
209 |
|
(1,284 |
) |
||
| Share of profit of associates |
(988 |
) |
(86 |
) |
||
| Changes in operating assets and liabilities: | ||||||
| Trade accounts receivable |
(1,529 |
) |
3,406 |
|
||
| Prepaid expenses and other assets |
(950 |
) |
5,864 |
|
||
| Trade accounts payable |
(5,236 |
) |
796 |
|
||
| Income taxes, net |
(2,267 |
) |
(5,494 |
) |
||
| Accrued expenses and other current liabilities |
1,150 |
|
(158 |
) |
||
| Net cash provided by operating activities |
$ 6,621 |
|
$ 4,215 |
|
||
| Investing Activities | ||||||
| Purchases of property, plant and equipment |
(9,027 |
) |
(7,430 |
) |
||
| Cash and cash equivalents acquired on reverse acquisition |
- |
|
1,496 |
|
||
| Distributions received from associates |
1,317 |
|
22 |
|
||
| Net cash used in investing activities |
$ (7,710 |
) |
$ (5,912 |
) |
||
| Financing Activities | ||||||
| Proceeds from the issuance of common stock |
6,563 |
|
115 |
|
||
| Payments on long term debt |
(7,000 |
) |
(2,800 |
) |
||
| Proceeds from (payments on) other debt, net |
5,831 |
|
4,577 |
|
||
| Net cash provided by financing activities |
$ 5,394 |
|
$ 1,892 |
|
||
| Net increase (decrease) in cash and cash equivalents |
4,305 |
|
195 |
|
||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash |
(497 |
) |
(1,271 |
) |
||
| 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 |
$ 28,377 |
|
$ 20,525 |
|
||
| Components of cash and cash equivalents and restricted cash | ||||||
| Balances with banks |
17,795 |
|
14,133 |
|
||
| Restricted cash |
10,582 |
|
6,392 |
|
||
| Total cash and cash equivalents and restricted cash |
$ 28,377 |
|
$ 20,525 |
|
||
| 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 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. | ||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||
|
2019 |
2018 |
2019 |
2018 |
|||||
| Net Loss |
(3,362 |
) |
(10,890 |
) |
(8,720 |
) |
(19,846 |
) |
| Income tax expense |
3,436 |
|
953 |
|
4,550 |
|
1,519 |
|
| Interest and other expense, net |
5,268 |
|
3,362 |
|
13,434 |
|
13,873 |
|
| Depreciation and amortization expense |
7,425 |
|
7,919 |
|
22,056 |
|
18,668 |
|
| Restructuring and other merger related cost |
220 |
|
6,519 |
|
2,058 |
|
12,776 |
|
| Share-based compensation expense |
370 |
|
249 |
|
1,151 |
|
249 |
|
| Warrant contra revenue |
- |
|
- |
|
730 |
|
- |
|
| Adjusted EBITDA |
13,357 |
|
8,112 |
|
35,259 |
|
27,239 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20191106005765/en/
Source:
Investor Relations
Sean Mansouri, CFA or Cody Slach
Gateway Investor Relations
(949) 574-3860
investor@startek.com