srt20190724_8k.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 6, 2019

 

STARTEK, INC.

(Exact name of Registrant as specified in its charter)

 

DELAWARE

1-12793

84-1370538

(State or other jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

6200 South Syracuse Way, Suite 485, Greenwood Village Co 80111

(Address of principal executive offices; zip code)

 

Registrant’s telephone number, including area code: (303) 262-4500

 

(Former name, former address and former fiscal year, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

SRT

New York Stock Exchange, Inc.

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act . ☐

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On November 6, 2019, Startek, Inc. (the “Company”) issued a press release reporting its earnings for its third quarter ended September 30, 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. This press release shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933.

 

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit Number  Exhibit Description

 

99.1

Press Release dated November 6, 2019

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

STARTEK, INC.

     
     
     

November 6, 2019

By: 

/s/ Ramesh Kamath

 

 

Ramesh Kamath

Chief Financial Officer

 

ex_151272.htm

 

Exhibit 99.1

 

 

Startek Reports Quarterly Financial Results

 

GREENWOOD VILLAGE, CO – November 6, 2019 - Startek, Inc. (NYSE:SRT), a global provider of customer experience management solutions, is reporting financial results for the quarter ended September 30, 2019.

 

Financial Results

The results presented for the quarter ended September 30, 2019 and June 30, 2019 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 September 30, 2018 include Startek financial results from July 20, 2018 to September 30, 2018, combined with Aegis financial results from July 1, 2018 to September 30, 2018.

 

Total revenue for the quarter increased 3% to $164.6 million compared to $160.6 million in the quarter ended June 30, 2019, and was up 9% compared to $151.5 million in the quarter ended September 30, 2018.

 

Gross profit for the quarter increased 3% to $28.5 million compared to $27.6 million in the quarter ended June 30, 2019, and was up 25% compared to $22.8 million in the quarter ended September 30, 2018.

 

Gross margin increased 10 basis points to 17.3% during the quarter compared to 17.2% in the quarter ended June 30, 2019, and increased 230 basis points compared to 15.0% in the quarter ended September 30, 2018.

 

Selling, general and administrative (SG&A) expenses were $22.9 million compared to $24.9 million in the quarter ended June 30, 2019, and $22.8 million in the year-ago quarter. As a percentage of revenue, SG&A improved to 13.9% compared to 15.5% in the quarter ended June 30, 2019 and 15.1% in the year-ago quarter.

 

Net loss attributable to Startek shareholders for the quarter was $2.8 million or $(0.07) per share, compared to a net loss of $3.6 million or $(0.10) per share in the quarter ended June 30, 2019, and a net loss of $10.9 million or $(0.32) per share in the year-ago quarter.

 

Adjusted EBITDA* for the quarter increased 21% to $13.4 million compared to $11.0 million in the quarter ended June 30, 2019, and increased 64% compared to $8.1 million in the year-ago quarter.

*A non-GAAP measure defined below.

 

Management Commentary

“Our third quarter was one of the strongest in Startek history, with record levels of revenue, gross margin and adjusted EBITDA since last year’s business combination with Aegis,” said Lance Rosenzweig, president & global CEO of Startek. “The work we have put in over the last year to integrate with Aegis, drive synergies, enhance our operating model, and convert our sales pipeline are all translating into material improvements in our business.

 

“During the quarter, we rebranded Aegis and are now officially going to market globally as Startek. Both Startek and Aegis have built a reputation for delivering exceptional customer experiences (CX) for the world’s finest brands, and we will continue to do so under the unified Startek brand with more than 45,000 CX experts across 13 countries and six continents.

 

“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 Startek are right in front of us.”

 

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, November 6, 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: 8491158

 

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 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 November 13, 2019.

 

Toll-free replay number: (855) 859-2056

International replay number: (404) 537-3406

Replay ID: 8491158

 

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 45,000 outsourcing experts across 54 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-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.

 

 

 

 

 

Investor Relations

Sean Mansouri, CFA or Cody Slach

Gateway Investor Relations

(949) 574-3860

investor@startek.com

 

 

 

 

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  

 

 

 

 

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(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)

(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.

 

 

Adjusted EBITDA:

                               
     

Three Months Ended September

   

Nine Months Ended September

 
     

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 acquisition 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