<< Back
Startek Reports Second Quarter 2020 Financial Results
Company Drives Consistent Month-over-Month Improvements During the Quarter
Remains Comfortable with Liquidity Position; Active Workforce Back to 80% of Pre-COVID Levels
Management Commentary
“As we navigated COVID-19 related headwinds across our geographies, we emerged from the second quarter as a stronger, more efficient organization,” said
“We have been closely monitoring the fluctuating status of lockdowns and reopenings across our operating regions. With the priority of keeping our entire global team safe and healthy, we moved swiftly to get 40,000+ team members to either work from home—through our new ‘StarCloud’ remote work capabilities—or in one of our delivery campuses, which adhere to strict social distancing and recommended health guidelines. Approximately 80% of our workforce is active today compared to just 60% in mid-April, and I am incredibly proud of our team’s flexibility and effectiveness in completing this pivot.
“An emerging trend from clients and prospects in response to the pandemic has been the adoption of digital services, particularly across high-growth verticals that are experiencing tailwinds from the COVID-19 environment. We are seeing positive momentum with clients in industries such as healthcare, e-commerce, and even cable/media in the wake of elevated consumer demand. Targeting these verticals has been a consistent part of our strategy, even predating the pandemic, so we have been well-equipped for this opportunity. As our clients’ businesses evolve, we are committed to helping their digital capabilities evolve with them.
“Although we have limited visibility on the effects of the pandemic going forward, we are well-positioned to continue our recovery and maintain a high level of active workforce. If some of our geographies go back into lockdown, we are now much better equipped for remote work through our StarCloud technology. We plan to maintain prudent cost controls, as reflected by our fourth consecutive quarter of SG&A reductions, and we remain comfortable with our liquidity position as we navigate through this dynamic environment.”
Second Quarter 2020 Financial Results
Net revenue for the quarter was
Gross profit in the second quarter was
Selling, general and administrative (SG&A) expenses decreased to
Net loss attributable to Startek shareholders for the quarter was
Adjusted net loss* in the second quarter of 2020 was
Adjusted EBITDA* for the quarter was
On
Senior Term Loan and Revolving Credit Facility Amendment
Subsequent to the quarter, Startek entered into an amendment agreement for its senior term loan and revolving credit facility. The agreement continues to provide for a
*A non-GAAP measure defined below.
Conference Call and Webcast Details
Startek management will hold a conference call today at
Date:
Time:
Toll-free dial-in number: 1-800-954-1052
International dial-in number: 1-212-231-2925
Conference ID: 21967515
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
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 21967515
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 40,000 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
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) (Unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Revenue |
|
|
142,652 |
|
|
|
161,283 |
|
|
|
303,829 |
|
|
|
322,425 |
|
|
Warrant contra revenue |
|
|
(485 |
) |
|
|
(730 |
) |
|
|
(763 |
) |
|
|
(730 |
) |
|
Net Revenue |
|
|
142,167 |
|
|
|
160,553 |
|
|
|
303,066 |
|
|
|
321,695 |
|
|
Cost of services |
|
|
(126,354 |
) |
|
|
(132,993 |
) |
|
|
(267,195 |
) |
|
|
(266,921 |
) |
|
Gross profit |
|
|
15,813 |
|
|
|
27,560 |
|
|
|
35,871 |
|
|
|
54,774 |
|
|
Selling, general and administrative expenses |
|
|
(14,644 |
) |
|
|
(24,936 |
) |
|
|
(31,899 |
) |
|
|
(49,015 |
) |
|
Impairment losses and restructuring/exit cost |
|
|
(235 |
) |
|
|
(721 |
) |
|
|
(24,557 |
) |
|
|
(1,850 |
) |
|
Acquisition related cost |
|
|
- |
|
|
|
(25 |
) |
|
|
- |
|
|
|
11 |
|
|
Operating (Loss) / Income |
|
|
934 |
|
|
|
1,878 |
|
|
|
(20,585 |
) |
|
|
3,920 |
|
|
Share of (loss) / profit of equity accounted investees |
|
|
(12 |
) |
|
|
662 |
|
|
|
(20 |
) |
|
|
1,003 |
|
|
Interest expense, net |
|
|
(3,190 |
) |
|
|
(4,026 |
) |
|
|
(6,696 |
) |
|
|
(8,492 |
) |
|
Exchange gain / (loss), net |
|
|
(1,637 |
) |
|
|
14 |
|
|
|
291 |
|
|
|
(677 |
) |
|
Loss before income taxes |
|
|
(3,905 |
) |
|
|
(1,472 |
) |
|
|
(27,010 |
) |
|
|
(4,246 |
) |
|
Income tax expense |
|
|
1,283 |
|
|
|
730 |
|
|
|
4,159 |
|
|
|
1,113 |
|
|
Net loss |
|
|
(5,188 |
) |
|
|
(2,202 |
) |
|
|
(31,169 |
) |
|
|
(5,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) / income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interests |
|
|
29 |
|
|
|
1,392 |
|
|
|
605 |
|
|
|
1,581 |
|
|
Net loss attributable to Startek shareholders |
|
|
(5,217 |
) |
|
|
(3,594 |
) |
|
|
(31,774 |
) |
|
|
(6,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
|
|
(0.14 |
) |
|
|
(0.10 |
) |
|
|
(0.82 |
) |
|
|
(0.18 |
) |
|
Weighted average common shares outstanding - basic and diluted |
|
|
38,614 |
|
|
|
37,779 |
|
|
|
38,571 |
|
|
|
37,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) (In thousands, except per share amounts) (Unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Net Loss |
|
|
(5,188 |
) |
|
|
(2,202 |
) |
|
|
(31,169 |
) |
|
|
(5,359 |
) |
|
Net income attributable to noncontrolling interests |
|
|
29 |
|
|
|
1,392 |
|
|
|
605 |
|
|
|
1,581 |
|
|
Net loss attributable to Startek shareholders |
|
|
(5,217 |
) |
|
|
(3,594 |
) |
|
|
(31,774 |
) |
|
|
(6,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) / income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
727 |
|
|
|
32 |
|
|
|
(3,665 |
) |
|
|
599 |
|
|
Change in fair value of derivative instruments |
|
|
(8 |
) |
|
|
413 |
|
|
|
(680 |
) |
|
|
348 |
|
|
Pension amortization |
|
|
(3,026 |
) |
|
|
(236 |
) |
|
|
(2,630 |
) |
|
|
(60 |
) |
|
Comprehensive (loss) / income |
|
|
(2,307 |
) |
|
|
209 |
|
|
|
(6,975 |
) |
|
|
887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) / income, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) / income attributable to noncontrolling interest |
|
|
(1,787 |
) |
|
|
(111 |
) |
|
|
(1,624 |
) |
|
|
(25 |
) |
|
Other comprehensive (loss) / income attributable to Startek shareholders |
|
|
(520 |
) |
|
|
320 |
|
|
|
(5,351 |
) |
|
|
912 |
|
|
|
|
|
(2,307 |
) |
|
|
209 |
|
|
|
(6,975 |
) |
|
|
887 |
|
|
Comprehensive (loss) / income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to noncontrolling interests |
|
|
(1,758 |
) |
|
|
1,281 |
|
|
|
(1,019 |
) |
|
|
1,556 |
|
|
Comprehensive loss attributable to Startek shareholders |
|
|
(5,737 |
) |
|
|
(3,274 |
) |
|
|
(37,125 |
) |
|
|
(6,028 |
) |
|
|
|
|
(7,495 |
) |
|
|
(1,993 |
) |
|
|
(38,144 |
) |
|
|
(4,472 |
) |
|
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) |
||||||||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
|
|
|
2020 |
|
|
2019 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
47,451 |
|
|
|
20,464 |
|
|
Restricted cash |
|
|
8,966 |
|
|
|
12,162 |
|
|
Trade accounts receivable, net |
|
|
70,194 |
|
|
|
108,479 |
|
|
Unbilled revenue |
|
|
40,181 |
|
|
|
41,449 |
|
|
Prepaid and other current assets |
|
|
14,308 |
|
|
|
12,008 |
|
|
Total current assets |
|
|
181,100 |
|
|
|
194,562 |
|
|
Property, plant and equipment, net |
|
|
37,644 |
|
|
|
37,507 |
|
|
Operating lease right-of-use assets |
|
|
77,437 |
|
|
|
73,692 |
|
|
Intangible assets, net |
|
|
105,644 |
|
|
|
110,807 |
|
|
|
|
|
196,633 |
|
|
|
219,341 |
|
|
Investment in associates |
|
|
109 |
|
|
|
553 |
|
|
Deferred tax assets, net |
|
|
2,980 |
|
|
|
5,251 |
|
|
Prepaid expenses and other non-current assets |
|
|
17,113 |
|
|
|
16,370 |
|
|
Total assets |
|
|
618,660 |
|
|
|
658,083 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Trade accounts payables |
|
|
18,669 |
|
|
|
25,449 |
|
|
Accrued expenses |
|
|
54,857 |
|
|
|
45,439 |
|
|
Short term debt |
|
|
29,134 |
|
|
|
26,491 |
|
|
Current maturity of long term debt |
|
|
9,863 |
|
|
|
18,233 |
|
|
Current maturity of operating lease obligation |
|
|
20,223 |
|
|
|
19,677 |
|
|
Other current liabilities |
|
|
39,089 |
|
|
|
37,159 |
|
|
Total current liabilities |
|
|
171,835 |
|
|
|
172,448 |
|
|
Long term debt |
|
|
110,923 |
|
|
|
130,144 |
|
|
Operating lease liabilities |
|
|
58,251 |
|
|
|
54,341 |
|
|
Other non-current liabilities |
|
|
17,935 |
|
|
|
11,140 |
|
|
Deferred tax liabilities, net |
|
|
17,095 |
|
|
|
18,226 |
|
|
Total liabilities |
|
|
376,039 |
|
|
|
386,299 |
|
|
Commitments and contingencies |
|
|
— |
|
|
|
— |
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock, 60,000,000 non-convertible shares, |
|
|
401 |
|
|
|
385 |
|
|
Additional paid-in capital |
|
|
286,205 |
|
|
|
276,827 |
|
|
Accumulated deficit |
|
|
(78,332 |
) |
|
|
(46,145 |
) |
|
Accumulated other comprehensive loss |
|
|
(11,373 |
) |
|
|
(6,022 |
) |
|
Equity attributable to Startek shareholders |
|
|
196,901 |
|
|
|
225,045 |
|
|
Non-controlling interest |
|
|
45,720 |
|
|
|
46,739 |
|
|
Total stockholders’ equity |
|
|
242,621 |
|
|
|
271,784 |
|
|
Total liabilities and stockholders’ equity |
|
|
618,660 |
|
|
|
658,083 |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
||||||||
|
|
|
|
|
|||||
|
|
|
Six Months Ended |
|
|||||
|
|
|
2020 |
|
|
2019 |
|
||
|
Operating Activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(31,169 |
) |
|
$ |
(5,359 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
14,328 |
|
|
|
14,631 |
|
|
Impairment of goodwill |
|
|
22,708 |
|
|
|
- |
|
|
Profit on sale of property, plant and equipment |
|
|
- |
|
|
|
(223 |
) |
|
Provision for doubtful accounts |
|
|
889 |
|
|
|
1,169 |
|
|
Warrant contra revenue |
|
|
763 |
|
|
|
730 |
|
|
Share-based compensation expense |
|
|
209 |
|
|
|
781 |
|
|
Deferred income taxes |
|
|
1,604 |
|
|
|
(1,224 |
) |
|
Share of profit of associates |
|
|
20 |
|
|
|
(1,003 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
|
34,022 |
|
|
|
(1,218 |
) |
|
Prepaid expenses and other assets |
|
|
(2,301 |
) |
|
|
(7,677 |
) |
|
Trade accounts payable |
|
|
(5,920 |
) |
|
|
(2,091 |
) |
|
Income taxes, net |
|
|
(2,314 |
) |
|
|
(2,663 |
) |
|
Accrued expenses and other current liabilities |
|
|
15,558 |
|
|
|
(1,280 |
) |
|
Net cash (used in) / generated from operating activities |
|
$ |
48,397 |
|
|
$ |
(5,427 |
) |
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(7,864 |
) |
|
|
(7,302 |
) |
|
Proceeds from equity-accounted investees |
|
|
395 |
|
|
|
1,329 |
|
|
Net cash used in generated investing activities |
|
$ |
(7,469 |
) |
|
$ |
(5,973 |
) |
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of common stock |
|
|
8,009 |
|
|
|
6,466 |
|
|
Payments on long term debt |
|
|
(4,200 |
) |
|
|
(4,200 |
) |
|
Proceeds from (payments on) other debt, net |
|
|
(20,449 |
) |
|
|
10,513 |
|
|
Net cash (used in) / generated from financing activities |
|
$ |
(16,640 |
) |
|
$ |
12,779 |
|
|
Net increase in cash and cash equivalents |
|
|
24,288 |
|
|
|
1,379 |
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
|
|
(497 |
) |
|
|
(40 |
) |
|
Cash and cash equivalents and restricted cash at beginning of period |
|
|
32,626 |
|
|
|
24,569 |
|
|
Cash and cash equivalents and restricted cash at end of period |
|
$ |
56,417 |
|
|
$ |
25,908 |
|
|
|
|
|
|
|
|
|
|
|
|
Components of cash and cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
|
Balances with banks |
|
|
47,451 |
|
|
|
15,452 |
|
|
Restricted cash |
|
|
8,966 |
|
|
|
10,456 |
|
|
Total cash and cash equivalents and restricted cash |
|
|
56,417 |
|
|
$ |
25,908 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
|
Cash paid for Interest and other finance cost |
|
|
6,440 |
|
|
|
8,200 |
|
|
Cash paid for income taxes |
|
|
4,017 |
|
|
|
4,920 |
|
|
Non cash warrant contra revenue |
|
|
763 |
|
|
|
730 |
|
|
Non cash share-based compensation expenses |
|
|
209 |
|
|
|
781 |
|
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.
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 June |
|
|
Six Months Ended June |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Net Loss |
|
|
(5,188 |
) |
|
|
(2,202 |
) |
|
|
(31,169 |
) |
|
|
(5,359 |
) |
|
Income tax expense |
|
|
1,283 |
|
|
|
730 |
|
|
|
4,159 |
|
|
|
1,113 |
|
|
Interest and other expense, net |
|
|
3,202 |
|
|
|
3,364 |
|
|
|
6,716 |
|
|
|
7,489 |
|
|
Exchange gain/(loss), net |
|
|
1,637 |
|
|
|
(14 |
) |
|
|
(291 |
) |
|
|
677 |
|
|
Depreciation and amortization expense |
|
|
7,234 |
|
|
|
7,328 |
|
|
|
14,328 |
|
|
|
14,631 |
|
|
Impairment losses and restructuring cost |
|
|
235 |
|
|
|
746 |
|
|
|
24,557 |
|
|
|
1,839 |
|
|
Share-based compensation expense |
|
|
(82 |
) |
|
|
356 |
|
|
|
209 |
|
|
|
781 |
|
|
Warrant contra revenue |
|
|
485 |
|
|
|
730 |
|
|
|
763 |
|
|
|
730 |
|
|
Adjusted EBITDA |
|
|
8,806 |
|
|
|
11,038 |
|
|
|
19,272 |
|
|
|
21,901 |
|
|
Adjusted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June |
|
|
Six Months Ended June |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Profit attributable to Startek shareholders |
|
|
(5,217 |
) |
|
|
(3,594 |
) |
|
|
(31,774 |
) |
|
|
(6,940 |
) |
|
Add: Share based compensation expense |
|
|
(82 |
) |
|
|
356 |
|
|
|
209 |
|
|
|
781 |
|
|
Add: Amortization of intangible assets |
|
|
2,260 |
|
|
|
2,428 |
|
|
|
4,522 |
|
|
|
4,739 |
|
|
Add: Warrant contra revenue |
|
|
485 |
|
|
|
730 |
|
|
|
763 |
|
|
|
730 |
|
|
Add: |
|
|
- |
|
|
|
- |
|
|
|
22,708 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income / (loss) (non-GAAP) |
|
|
(2,554 |
) |
|
|
(80 |
) |
|
|
(3,572 |
) |
|
|
(690 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - Basic & Diluted |
|
|
38,614 |
|
|
|
37,779 |
|
|
|
38,571 |
|
|
|
37,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EPS - Basic & Diluted |
|
|
(0.07 |
) |
|
|
(0.00 |
) |
|
|
(0.09 |
) |
|
|
(0.02 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200810005733/en/
Investor Relations
Gateway Investor Relations
(949) 574-3860
investor@startek.com
Source: