srt20220331_10q.htm
0001031029 StarTek, Inc. false --12-31 Q1 2022 60,000,000 60,000,000 0.01 0.01 40,953,221 40,893,396 672,176 412,769 3 8.5 8.5 5 0 3 12 - 10,937 146 670 3.42 3.58 0.00 0.00 62.5 93 80 61.35 61.35 8 6,688 13 20 13 20 13 20 8 12 Excludes broker commission. 00010310292022-01-012022-03-31 xbrli:shares 00010310292022-04-28 thunderdome:item iso4217:USD 00010310292021-01-012021-03-31 iso4217:USDxbrli:shares 00010310292022-03-31 00010310292021-12-31 00010310292020-12-31 00010310292021-03-31 0001031029us-gaap:CommonStockMember2021-12-31 0001031029us-gaap:TreasuryStockMember2021-12-31 0001031029us-gaap:AdditionalPaidInCapitalMember2021-12-31 0001031029us-gaap:RetainedEarningsMember2021-12-31 0001031029us-gaap:AccumulatedTranslationAdjustmentMember2021-12-31 0001031029us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-12-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2021-12-31 0001031029us-gaap:ParentMember2021-12-31 0001031029us-gaap:NoncontrollingInterestMember2021-12-31 0001031029us-gaap:CommonStockMember2022-01-012022-03-31 0001031029us-gaap:TreasuryStockMember2022-01-012022-03-31 0001031029us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-31 0001031029us-gaap:RetainedEarningsMember2022-01-012022-03-31 0001031029us-gaap:AccumulatedTranslationAdjustmentMember2022-01-012022-03-31 0001031029us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-01-012022-03-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2022-01-012022-03-31 0001031029us-gaap:ParentMember2022-01-012022-03-31 0001031029us-gaap:NoncontrollingInterestMember2022-01-012022-03-31 0001031029us-gaap:CommonStockMember2022-03-31 0001031029us-gaap:TreasuryStockMember2022-03-31 0001031029us-gaap:AdditionalPaidInCapitalMember2022-03-31 0001031029us-gaap:RetainedEarningsMember2022-03-31 0001031029us-gaap:AccumulatedTranslationAdjustmentMember2022-03-31 0001031029us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-03-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2022-03-31 0001031029us-gaap:ParentMember2022-03-31 0001031029us-gaap:NoncontrollingInterestMember2022-03-31 0001031029us-gaap:CommonStockMember2020-12-31 0001031029us-gaap:TreasuryStockMember2020-12-31 0001031029us-gaap:AdditionalPaidInCapitalMember2020-12-31 0001031029us-gaap:RetainedEarningsMember2020-12-31 0001031029us-gaap:AccumulatedTranslationAdjustmentMember2020-12-31 0001031029us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-12-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-12-31 0001031029us-gaap:ParentMember2020-12-31 0001031029us-gaap:NoncontrollingInterestMember2020-12-31 0001031029us-gaap:CommonStockMember2021-01-012021-03-31 0001031029us-gaap:TreasuryStockMember2021-01-012021-03-31 0001031029us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-31 0001031029us-gaap:RetainedEarningsMember2021-01-012021-03-31 0001031029us-gaap:AccumulatedTranslationAdjustmentMember2021-01-012021-03-31 0001031029us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-01-012021-03-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2021-01-012021-03-31 0001031029us-gaap:ParentMember2021-01-012021-03-31 0001031029us-gaap:NoncontrollingInterestMember2021-01-012021-03-31 0001031029us-gaap:CommonStockMember2021-03-31 0001031029us-gaap:TreasuryStockMember2021-03-31 0001031029us-gaap:AdditionalPaidInCapitalMember2021-03-31 0001031029us-gaap:RetainedEarningsMember2021-03-31 0001031029us-gaap:AccumulatedTranslationAdjustmentMember2021-03-31 0001031029us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-03-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2021-03-31 0001031029us-gaap:ParentMember2021-03-31 0001031029us-gaap:NoncontrollingInterestMember2021-03-31 0001031029srtk:ChangeInPaymentOfCallOptionToAcquireControllingStakeToInvestingActivitiesFromOperatingActivitiesMembersrt:RestatementAdjustmentMember2021-04-012021-06-30 0001031029srtk:CorrectionToDebtIssuanceCostsFromIncomeToCashFlowStatementsMembersrt:RestatementAdjustmentMember2021-10-012021-12-31 0001031029srtk:AggregateChangeFromReclassificationsMembersrt:RestatementAdjustmentMember2021-01-012021-12-31 0001031029srt:AmericasMember2022-03-31 0001031029srt:AmericasMember2021-12-31 0001031029country:IN2022-03-31 0001031029country:IN2021-12-31 0001031029srtk:Malaysia1Member2022-03-31 0001031029srtk:Malaysia1Member2021-12-31 0001031029country:SA2022-03-31 0001031029country:SA2021-12-31 0001031029country:AU2022-03-31 0001031029country:AU2021-12-31 utr:Y 00010310292021-01-012021-12-31 0001031029us-gaap:CustomerRelationshipsMember2022-03-31 0001031029us-gaap:CustomerRelationshipsMember2022-01-012022-03-31 0001031029srtk:BrandMember2022-03-31 0001031029srtk:BrandMember2022-01-012022-03-31 0001031029us-gaap:TrademarksMember2022-03-31 0001031029us-gaap:TrademarksMember2022-01-012022-03-31 0001031029us-gaap:OtherIntangibleAssetsMember2022-03-31 0001031029us-gaap:OtherIntangibleAssetsMember2022-01-012022-03-31 0001031029us-gaap:CustomerRelationshipsMember2021-12-31 0001031029us-gaap:CustomerRelationshipsMember2021-01-012021-12-31 0001031029srtk:BrandMember2021-12-31 0001031029srtk:BrandMember2021-01-012021-12-31 0001031029us-gaap:TrademarksMember2021-12-31 0001031029us-gaap:TrademarksMember2021-01-012021-12-31 0001031029us-gaap:OtherIntangibleAssetsMember2021-12-31 0001031029us-gaap:OtherIntangibleAssetsMember2021-01-012021-12-31 0001031029srtk:CommunicationsMember2022-01-012022-03-31 0001031029srtk:CommunicationsMember2021-01-012021-03-31 0001031029srtk:ECommerceAndConsumerMember2022-01-012022-03-31 0001031029srtk:ECommerceAndConsumerMember2021-01-012021-03-31 0001031029srtk:MediaMember2022-01-012022-03-31 0001031029srtk:MediaMember2021-01-012021-03-31 0001031029srtk:FinancialAndBusinessServiceMember2022-01-012022-03-31 0001031029srtk:FinancialAndBusinessServiceMember2021-01-012021-03-31 0001031029srtk:TravelAndHospitalityMember2022-01-012022-03-31 0001031029srtk:TravelAndHospitalityMember2021-01-012021-03-31 0001031029srtk:HealthCareAndEducationMember2022-01-012022-03-31 0001031029srtk:HealthCareAndEducationMember2021-01-012021-03-31 0001031029srtk:TechnologyITAndRelatedServiceMember2022-01-012022-03-31 0001031029srtk:TechnologyITAndRelatedServiceMember2021-01-012021-03-31 0001031029srtk:OtherSectorMember2022-01-012022-03-31 0001031029srtk:OtherSectorMember2021-01-012021-03-31 0001031029us-gaap:EmployeeStockOptionMember2022-01-012022-03-31 0001031029us-gaap:EmployeeStockOptionMember2021-01-012021-03-31 0001031029srtk:RestrictedStockdeferredStockUnitsMember2022-01-012022-03-31 0001031029srtk:RestrictedStockdeferredStockUnitsMember2021-01-012021-03-31 0001031029srtk:StockOptionsAndWarrantsMember2022-01-012022-03-31 0001031029srtk:StockOptionsAndWarrantsMember2021-01-012021-03-31 0001031029us-gaap:EmployeeSeveranceMember2021-12-31 0001031029us-gaap:FacilityClosingMember2021-12-31 0001031029us-gaap:EmployeeSeveranceMember2022-01-012022-03-31 0001031029us-gaap:FacilityClosingMember2022-01-012022-03-31 0001031029us-gaap:EmployeeSeveranceMember2022-03-31 0001031029us-gaap:FacilityClosingMember2022-03-31 0001031029us-gaap:EmployeeSeveranceMember2020-12-31 0001031029us-gaap:FacilityClosingMember2020-12-31 0001031029us-gaap:EmployeeSeveranceMember2021-01-012021-12-31 0001031029us-gaap:FacilityClosingMember2021-01-012021-12-31 0001031029us-gaap:EmployeeSeveranceMembersrt:ScenarioForecastMember2022-10-012022-12-31 0001031029us-gaap:FacilityClosingMembersrt:ScenarioForecastMember2022-04-012022-06-30 utr:M 0001031029us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMembersrt:MinimumMember2022-01-012022-03-31 0001031029us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMembersrt:MaximumMember2022-01-012022-03-31 0001031029us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-01-012022-03-31 0001031029us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-03-31 0001031029srtk:WorkingCapitalFacilitiesMember2022-03-31 0001031029srtk:WorkingCapitalFacilitiesMember2021-12-31 0001031029us-gaap:LoansPayableMember2022-03-31 0001031029us-gaap:LoansPayableMember2021-12-31 0001031029us-gaap:SecuredDebtMember2022-03-31 0001031029us-gaap:SecuredDebtMember2021-12-31 0001031029srtk:FinanceLeaseObligationsMember2022-03-31 0001031029srtk:FinanceLeaseObligationsMember2021-12-31 0001031029us-gaap:LineOfCreditMember2022-03-31 xbrli:pure 0001031029srt:MinimumMemberus-gaap:LineOfCreditMember2022-01-012022-03-31 0001031029srt:MaximumMemberus-gaap:LineOfCreditMember2022-01-012022-03-31 0001031029srtk:SeniorDebtFacilityMember2021-02-18 0001031029srtk:SeniorDebtFacilityMemberus-gaap:LoansPayableMember2021-02-18 0001031029us-gaap:RevolvingCreditFacilityMembersrtk:SeniorDebtFacilityMember2021-02-18 0001031029srtk:SeniorDebtFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-02-182021-02-18 0001031029srtk:SeniorDebtFacilityMembersrtk:At21And24MonthsFromClosingMember2021-02-182021-02-18 0001031029srtk:SeniorDebtFacilityMembersrtk:At273033And36MonthsFromClosingMember2021-02-182021-02-18 0001031029srtk:SeniorDebtFacilityMembersrtk:At39424548And51MonthsFromClosingMember2021-02-182021-02-18 0001031029srtk:SeniorDebtFacilityMembersrtk:At54MonthsFromClosingMember2021-02-182021-02-18 0001031029srtk:SeniorDebtFacilityMembersrtk:At57MonthsFromClosingMember2021-02-182021-02-18 0001031029us-gaap:LoansPayableMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-31 0001031029us-gaap:LoansPayableMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-31 0001031029us-gaap:LoansPayableMembersrt:MaximumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-31 0001031029srtk:SeniorDebtFacilityMemberus-gaap:LoansPayableMember2021-02-182021-02-18 0001031029srtk:SeniorTermAgreementMemberus-gaap:LoansPayableMember2021-02-182021-02-18 0001031029srtk:SeniorTermAgreementMemberus-gaap:LoansPayableMember2021-02-18 0001031029srtk:SeniorTermAgreementMemberus-gaap:LoansPayableMember2022-03-31 0001031029srtk:SeniorDebtFacilityMember2021-12-31 0001031029srtk:SeniorDebtFacilityMember2020-12-31 0001031029srtk:SeniorDebtFacilityMember2022-01-012022-03-31 0001031029srtk:SeniorDebtFacilityMember2021-01-012021-12-31 0001031029srtk:SeniorDebtFacilityMember2022-03-31 0001031029srtk:NonrecourseFactoringMember2022-03-31 0001031029srtk:NonrecourseFactoringMember2021-12-31 0001031029srtk:BMOEquipmentLoanMemberus-gaap:SecuredDebtMember2018-12-27 0001031029srtk:BMOEquipmentLoanMemberus-gaap:SecuredDebtMember2022-03-31 0001031029srtk:EquipmentLoanMemberus-gaap:SecuredDebtMember2020-11-02 0001031029srtk:EquipmentLoanMemberus-gaap:SecuredDebtMember2022-03-31 0001031029srtk:AmazonTransactionAgreementMember2018-01-23 0001031029us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-03-31 0001031029us-gaap:EmployeeStockOptionMember2022-03-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-12-31 0001031029us-gaap:AociAttributableToNoncontrollingInterestMember2021-12-31 0001031029us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2021-12-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-01-012022-03-31 0001031029us-gaap:AociAttributableToNoncontrollingInterestMember2022-01-012022-03-31 0001031029us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-01-012022-03-31 0001031029us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-03-31 0001031029us-gaap:AociAttributableToNoncontrollingInterestMember2022-03-31 0001031029us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-03-31 0001031029us-gaap:OperatingSegmentsMembersrt:AmericasMember2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMembersrt:AmericasMember2021-01-012021-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:IndiaAndSriLankaMember2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:IndiaAndSriLankaMember2021-01-012021-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:Malaysia1Member2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:Malaysia1Member2021-01-012021-03-31 0001031029us-gaap:OperatingSegmentsMemberus-gaap:MiddleEastMember2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMemberus-gaap:MiddleEastMember2021-01-012021-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:ArgentinaAndPeruMember2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:ArgentinaAndPeruMember2021-01-012021-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:RestOfWorldMember2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMembersrtk:RestOfWorldMember2021-01-012021-03-31 0001031029us-gaap:OperatingSegmentsMember2022-01-012022-03-31 0001031029us-gaap:OperatingSegmentsMember2021-01-012021-03-31 0001031029us-gaap:MaterialReconcilingItemsMember2022-01-012022-03-31 0001031029us-gaap:MaterialReconcilingItemsMember2021-01-012021-03-31 0001031029us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMembersrtk:CustomerOneMember2022-01-012022-03-31 0001031029us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMembersrtk:CustomerOneMember2021-01-012021-03-31 0001031029srt:AmericasMember2022-03-31 0001031029srt:AmericasMember2021-12-31 0001031029srtk:IndiaAndSriLankaMember2022-03-31 0001031029srtk:IndiaAndSriLankaMember2021-12-31 0001031029srtk:Malaysia1Member2022-03-31 0001031029srtk:Malaysia1Member2021-12-31 0001031029us-gaap:MiddleEastMember2022-03-31 0001031029us-gaap:MiddleEastMember2021-12-31 0001031029srtk:ArgentinaAndPeruMember2022-03-31 0001031029srtk:ArgentinaAndPeruMember2021-12-31 0001031029srtk:RestOfWorldMember2022-03-31 0001031029srtk:RestOfWorldMember2021-12-31 0001031029srt:MinimumMember2022-01-012022-03-31 0001031029srt:MaximumMember2022-01-012022-03-31 0001031029srtk:PropertyPlantAndEquipmentNetMember2022-03-31 0001031029srtk:PropertyPlantAndEquipmentNetMember2021-12-31 0001031029srtk:CurrentMaturitiesOfLongtermDebtMember2022-03-31 0001031029srtk:CurrentMaturitiesOfLongtermDebtMember2021-12-31 0001031029srtk:CSSCorpLPMember2022-03-31 0001031029srtk:CSSCorpLPMember2021-12-31 0001031029srtk:ImmaterialAssociatesMember2021-12-31 0001031029srtk:CSSCorpMember2021-02-252021-02-25 0001031029srtk:CSSCorpMember2021-02-25 0001031029srtk:CSSCorpLPMember2021-02-252021-02-25 0001031029srtk:CSSCorpLPMember2021-02-25 0001031029srtk:CSPManagementLimitedMember2021-02-252021-02-25 0001031029srtk:CSSCorpLPMember2021-12-30 0001031029srtk:CSSCorpLPMember2021-01-012021-12-31 0001031029srtk:CSSCorpLPMember2022-01-012022-03-31 0001031029srtk:CSSCorpLPMember2022-03-31 0001031029srtk:CSSCorpLPMember2021-12-31 0001031029srtk:CSSCorpLPMember2021-01-012021-03-31 0001031029srtk:QueenslandPartnershipGroupPtyLtdMember2022-03-31 0001031029srtk:ServicesQueenslandPartnershipMember2022-03-31 0001031029srtk:ImmaterialAssociatesMember2022-03-31 0001031029srtk:ImmaterialAssociatesMember2022-01-012022-03-31 0001031029srtk:ImmaterialAssociatesMember2021-01-012021-03-31 0001031029srtk:RepurchasePlanMember2004-12-31 0001031029srtk:RepurchasePlanMember2021-08-26 0001031029srtk:RepurchasePlanMember2021-12-14 0001031029srtk:RepurchasePlanMember2022-01-012022-03-31 00010310292022-01-312022-01-31 0001031029srtk:RepurchasePlanMember2022-01-312022-01-31 0001031029srtk:RepurchasePlanMember2022-01-31 00010310292022-02-282022-02-28 0001031029srtk:RepurchasePlanMember2022-02-282022-02-28 0001031029srtk:RepurchasePlanMember2022-02-28 00010310292022-03-312022-03-31 0001031029srtk:RepurchasePlanMember2022-03-312022-03-31 0001031029srtk:RepurchasePlanMember2022-03-31 00010310292022-01-17 0001031029srtk:CSPManagementLimitedMembersrtk:StarTekMember2022-01-17
 
 

Table of Contents



 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 


 

Form 10-Q

(Mark One) 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

or 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                to                

 

Commission file number 1-12793


 

Startek, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

84-1370538

(State or other jurisdiction of

(I.R.S. employer

incorporation or organization)

Identification No.)

 

 

4610 South Ulster Street,

 

Suite 150, Denver, Colorado

80237

(Address of principal executive offices)

(Zip code)

 

(303) 262-4500

(Registrant’s telephone number, including area code)

 

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No ☐ 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No  ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer  ☐

Smaller reporting company  

 

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. ☐ 

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No ☒ 

 

As of April 28, 2022, there were 40,296,021 shares of Common Stock outstanding.

 



 

 

 

STARTEK, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

FORM 10-Q

 

 

PART I - FINANCIAL INFORMATION

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

Page

 

Consolidated Statement of Income (Loss) and Other Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

4

 

Consolidated Balance Sheets as of March 31, 2022(Unaudited) and December 31, 2021 

5

 

Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

6

 

Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

7

 

Note 1 Overview and Basis of Preparation

8

  Note 2 Summary of Significant Accounting Policies 9
  Note 3 Goodwill and Intangible Assets 12
  Note 4 Revenue 13
  Note 5 Net Income / (Loss) Per Share 15
  Note 6 Impairment Losses and Restructuring / Exit cost 15
  Note 7 Derivative Instruments 16
  Note 8 Fair Value Measurements 17
  Note 9 Debt 18
  Note 10 Share-Based Compensation 20
  Note 11 Accumulated Other Comprehensive Loss 21
  Note 12 Segment Reporting 22
  Note 13 Leases 23
  Note 14 Investment in Equity-Accounted Investees 24
  Note 15 Common Stock  25
  Note 16 Private Offer Transaction Cost 26
  Note 17 Subsequent Events 26

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

27

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

31

ITEM 4.

Controls and Procedures

31

 

 

 

PART II - OTHER INFORMATION

 

 

 

ITEM 1.

Legal proceeding

32

ITEM 1A.

Risk Factors

32

ITEM 2. Unregistered sales of equity securities and use of proceeds 32

ITEM 3.

Defaults upon senior securities 32
ITEM 4. Mine safety disclosure 32

ITEM 5. 

Other Information

32

ITEM 6.

Exhibits

33

SIGNATURES

 

34

 

 

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the following:

 

 

certain statements, including possible or assumed future results of operations, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

 

any statements regarding the prospects for our business or any of our services;

 

any statements preceded by, followed by or that include the words “may,” “will,” “should,” “seeks,” “believes,” “expects,” “anticipates,” “intends,” “continue,” “estimate,” “plans,” “future,” “targets,” “predicts,” “budgeted,” “projections,” “outlooks,” “attempts,” “is scheduled,” or similar expressions; and

 

other statements regarding matters that are not historical facts.

 

Our business and results of operations are subject to risks and uncertainties, many of which are beyond our ability to control or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by forward-looking statements, and investors are cautioned not to place undue reliance on such statements, which speak only as of the date thereof. Important factors that could cause actual results to differ materially from our expectations and may adversely affect our business and results of operations, include, but are not limited to, those items described herein or set forth in the Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on March 14, 2022 and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. Unless otherwise noted in this report, any description of "us," "we," or "our," refers to Startek, Inc. ("Startek") and its subsidiaries.

 

 

CHANGE IN FILING STATUS

 

In accordance with the SEC's expanded definition of Smaller Reporting Companies effective September 10, 2018, Startek qualifies for Smaller Reporting Company status. As such, it has decided to take advantage of the relief provided from Part 1, Item 3.

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

 

STARTEK, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENT OF INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Revenue

  167,317   163,495 

Warrant adjustment

  -   (425)

Net revenue

 $167,317  $163,070 

Cost of services

  (146,260)  (138,383)

Gross profit

 $21,057  $24,687 
         

Selling, general and administrative expenses

  (15,881)  (14,171)

Impairment losses and restructuring/exit cost

  (1,407)  (1,898)

Operating income

 $3,769  $8,618 
         

Share of loss of equity-accounted investees

  (8)  (14)

Interest expense, net and other income

  (974)  (13,769)

Foreign exchange gains (losses), net

  (408)  212 

Income (loss) before tax expense

 $2,379  $(4,953)

Tax expenses

  (2,093)  (4,902)

Net income (loss)

 $286  $(9,855)
         

Net income (loss)

        

Net income attributable to noncontrolling interests

 $1,529  $2,300 

Net loss attributable to Startek shareholders

 $(1,243) $(12,155)
         

Net loss per common share

        

Basic net loss attributable to Startek shareholders

 $(0.03) $(0.30)

Diluted net loss attributable to Startek shareholders

 $(0.03) $(0.30)
         

Weighted average common shares outstanding

        

Basic

  40,338   40,592 

Diluted

  40,338   40,592 

 

 

STARTEK, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Net income (loss)

 $286  $(9,855)

Net income attributable to noncontrolling interests

  1,529   2,300 

Net loss attributable to Startek shareholders

  (1,243)  (12,155)
         

Other comprehensive income (loss), net of taxes:

        

Foreign currency translation adjustments

  548   (1,092)

Change in fair value of derivative instruments

  -   8 

Pension amortization

  (1,137)  (384)

Other comprehensive loss

 $(589) $(1,468)
         

Other comprehensive income (loss), net of taxes

        

Other comprehensive loss attributable to non-controlling interests

  (655)  (69)

Other comprehensive income (loss) attributable to Startek shareholders

  66   (1,399)
  $(589) $(1,468)

Comprehensive income (loss)

        

Comprehensive income attributable to non-controlling interests

  874   2,231 

Comprehensive loss attributable to Startek shareholders

  (1,177)  (13,554)
  $(303) $(11,323)

 

See Notes to Consolidated Financial Statements.

 

 

 

STARTEK, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEET

(In thousands, except share data)

(Unaudited)

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 

Assets

        

Current assets

        

Cash and cash equivalents

  43,302   47,940 

Restricted cash

  8,946   7,456 

Trade accounts receivables, net

  85,542   106,937 

Unbilled revenue

  67,266   50,074 

Prepaid and other current assets

  17,720   12,611 

Total current assets

 $222,776  $225,018 
         

Non-current assets

        

Property, plant and equipment, net

  32,332   34,168 

Operating lease right-of-use assets

  59,299   63,012 

Intangible assets, net

  87,531   90,092 

Goodwill

  183,397   183,397 

Investment in equity-accounted investees

  31,680   31,688 

Deferred tax assets, net

  4,731   3,664 

Prepaid expenses and other non-current assets

  10,805   11,436 

Total non-current assets

 $409,775  $417,457 

Total assets

 $632,551  $642,475 
         

Liabilities and Shareholders' Equity

        

Current liabilities

        

Trade accounts payables

  8,169   11,916 

Accrued expenses

  53,706   53,203 

Short term debt

  3,535   3,611 

Current maturity of long term debt

  10,216   6,241 

Current maturity of operating lease liabilities

  24,052   24,393 

Other current liabilities

  44,236   48,265 

Total current liabilities

 $143,914  $147,629 
         

Non-current liabilities

        

Long term debt

  155,771   160,175 

Operating lease liabilities

  40,745   44,263 

Other non-current liabilities

  21,563   19,562 

Deferred tax liabilities, net

  18,244   17,526 

Total non-current liabilities

 $236,323  $241,526 

Total liabilities

 $380,237  $389,155 
         

Stockholders’ equity:

        

Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 40,953,221 and 40,893,396 shares issued as of March 31, 2022, and December 31, 2021, respectively

  410   409 

Additional paid-in capital

  292,104   291,537 

Accumulated deficit

  (85,286)  (84,043)

Treasury stock, 672,176 and 412,769 shares as of March 31, 2022, and December 31, 2021, respectively, at cost

  (3,183)  (1,912)

Accumulated other comprehensive loss

  (10,621)  (10,687)

Equity attributable to Startek shareholders

 $193,424  $195,304 

Non-controlling interests

  58,890   58,016 

Total stockholders’ equity

 $252,314  $253,320 

Total liabilities and stockholders’ equity

 $632,551  $642,475 

 

See Notes to Consolidated Financial Statements.

 

 

 

STARTEK, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Operating Activities

        

Net income (loss)

 $286  $(9,855)
         

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation and amortization

  7,588   6,803 

Profit on sale of property, plant and equipment

  (31)  (53)

Provision for doubtful accounts

  (66)  63 

Amortization of debt issuance costs (including loss on extinguishment of debt)

  146   11,241 

Amortisation of call option premium

  360   120 

Warrant contra revenue

  -   425 

Share-based compensation expense

  428   280 

Deferred income taxes

  (306)  558 

Share of loss of equity-accounted investees

  8   14 
         

Changes in operating assets and liabilities:

        

Trade accounts receivables

  21,603   12,848 

Prepaid expenses and other assets

  (21,398)  (5,964)

Trade accounts payables

  (3,717)  (5,447)

Income taxes, net

  130   2,727 

Accrued expenses and other liabilities

  (4,467)  4,908 

Net cash generated from operating activities

 $564  $18,668 
         

Investing Activities

        

Purchase of property, plant and equipment

  (1,902)  (2,922)

Investment in equity-accounted investees

  -   (25,000)

Payments for call option premium

  -   (3,000)

Net cash used in investing activities

 $(1,902) $(30,922)
         

Financing Activities

        

Proceeds from the issuance of common stock

  140   1,244 

Proceeds from long term debt (net of debt issuance cost paid to lenders)

  -   156,525 

Payments on long term debt

  -   (117,600)

Payments for loan fees related to long term debt

  -   (2,794)

(Payments on) proceeds from other borrowings, net

  (643)  (10,609)

Common stock repurchase

  (1,271)  - 

Net cash generated from/ (used in) financing activities

 $(1,774) $26,766 
         

Net increase (decarese) in cash and cash equivalents

  (3,112)  14,512 

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

  (36)  (425)

Cash and cash equivalents and restricted cash at beginning of period

  55,396   50,559 

Cash and cash equivalents and restricted cash at end of period

 $52,248  $64,646 
         

Components of cash and cash equivalents and restricted cash

        

Balance with banks

  43,302   57,665 

Restricted cash

  8,946   6,981 

Total cash and cash equivalents and restricted cash

 $52,248  $64,646 
         

Supplemental disclosure of cash flow information

        

Cash paid for interest and other finance costs

  2,131   14,443 

Cash paid for income taxes

  2,170   1,652 

Supplemental disclosure of non-cash activities

        

Non-cash warrant contra revenue

  -   425 

Non-cash share-based compensation expenses

  428   280 

 

See Notes to Consolidated Financial Statements.

 

 

 

STARTEK, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

  

Common Stock

  

Treasury Stock

          

Other Items of OCI

             
  

Shares

  

Amount

  

Shares

  

Amount

  

Additional paid-in capital

  

Accumulated deficit

  

Foreign currency translation

  

Change in fair value of derivative instruments

  

Unrecognised pension cost

  

Equity attributable to Startek shareholders

  

Non-controlling interest

  

Total stockholders' equity

 

Three months ended

                                                

Balance at December 31, 2021

  40,893,396  $409   412,769  $(1,912) $291,537  $(84,043) $(6,816) $-  $(3,871) $195,304  $58,016  $253,320 

Issuance of common stock

  59,825   1   -   -   139   -   -   -   -   140   -   140 

Share-based compensation expenses

  -   -   -   -   428   -   -   -   -   428   -   428 

Net income (loss)

  -   -   -   -   -   (1,243)  -   -   -   (1,243)  1,529   286 

Other comprehensive income (loss)

  -   -   -   -   -   -   548   -   (482)  66   (655)  (589)

Repurchase of common stock

  -   -   259,407   (1,271)  -   -   -   -   -   (1,271)  -   (1,271)

Balance at March 31, 2022

  40,953,221  $410   672,176  $(3,183) $292,104  $(85,286) $(6,268) $-  $(4,353) $193,424  $58,890  $252,314 
                                                 

Balance at December 31, 2020

  40,453,462  $405   -  $-  $288,700  $(85,543) $(4,529) $(8) $(2,749) $196,276  $50,606  $246,882 

Issuance of common stock

  328,342   3   -   -   1,241   -   -   -   -   1,244   -   1,244 

Share-based compensation expenses

  -   -   -   -   280   -   -   -   -   280   -   280 

Warrant expenses

  -   -   -   -   425   -   -   -   -   425   -   425 

Net income (loss)

  -   -   -   -   -   (12,155)  -   -   -   (12,155)  2,300   (9,855)

Other comprehensive loss for the period

  -   -   -   -   -   -   (1,092)  8   (315)  (1,399)  (69)  (1,468)

Balance at March 31, 2021

  40,781,804  $408   -  $-  $290,646  $(97,698) $(5,621) $-  $(3,064) $184,671  $52,837  $237,508 

 

As of March 31, 2022 and December 31, 2021, there were 40,281,045 and 40,480,627 shares outstanding respectively of Common Stock, net off treasury stock.

 

 

STARTEK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(In thousands, except share and per share data)

(Unaudited)

 

 

1. OVERVIEW AND BASIS OF PREPARATION

 

Unless otherwise noted in this report, any description of "us," "we," or "our," refers to Startek, Inc. and its subsidiaries (the "Company"). Financial information in this report is presented in U.S. dollars.

 

Business

 

Startek is a leading global provider of technology-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 enablement across all touchpoints and channels. Startek has more than 43,000 CX experts globally spread across 38 delivery campuses in 13 countries. The Company services over 190 clients across various industries such as Banking and Financial Services, Insurance, Technology, Telecom, Healthcare, Travel and Hospitality, Consumer Goods, Retail, and Energy and Utilities.

 

The Company offers a repository of digital and omnichannel solutions based on decades of experience in driving growth by putting the customer at the center of our business. Because no one solution fits all, we have crafted solution delivery to suit various industries. Startek has delivery campuses across India, United States, Malaysia, Philippines, Australia, South Africa, Canada, Honduras, Jamaica, Kingdom of Saudi Arabia, Argentina, Peru, and Sri Lanka.

 

Basis of preparation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements.

 

These consolidated financial statements reflect all adjustments (consisting only of normal recurring entries, except as noted) which, in the opinion of management, are necessary for fair presentation. The results of operations for interim periods are not necessarily indicative of full-year results.

 

The consolidated financial statements include the accounts of Startek, Inc and its all subsidiaries over which the Company exerts control. When the Company does not have majority ownership in an entity but exerts significant influence over that entity, the Company accounts for the entity under the equity method of accounting. All intercompany balances are eliminated on consolidation. Where our ownership of a subsidiary was less than 100%, the non-controlling interest is reported in our consolidated balance sheet. The non-controlling interest in our consolidated net income is reported as "Net income attributable to non-controlling interests" in our consolidated statement of income (loss).

 

As of December 31, 2021, the consolidated balance sheet included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by U.S. GAAP. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended  December 31, 2021.

 

The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable.

 

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, intangibles, impairment of goodwill, valuation allowances for deferred tax assets, leases, provision for doubtful debts and restructuring costs. Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Any changes in estimates are adjusted prospectively in the Company’s consolidated financial statements.

 

Revenue

 

The Company utilizes a five-step process given in ASC 606, for revenue recognition that focuses on the transfer of control, rather than the transfer of risks and rewards. It also provided additional guidance on accounting for contract acquisition and fulfillment costs. Refer to Note 4 on "Revenue" for further information.

 

Leases

 

We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets, current maturity of operating lease liabilities, and operating lease liabilities in our consolidated balance sheet. Finance leases are included in property plant and equipment, long-term debt, accrued expenses, and other current liabilities in our consolidated balance sheet.

  

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the balance lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the date of initial application on determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain to exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

 

ASC 842 requires an entity to apply the guidance on impairment of long-lived assets in ASC 360 to right-of-use assets. Therefore, right-of-use assets must be monitored for impairment, like other long-lived nonfinancial assets, regardless of whether the lease is an operating lease or a finance lease. When impairment indicators exist, an asset (asset group) should be tested to determine whether there is an impairment.

 

The Company elected the practical expedient permitted under the transition guidance under Topic 842, which among other matters, allowed the Company (i) not to apply the recognition requirements to short-term leases (leases with a lease term of 12 months or less), (ii) not to reassess whether any expired or existing contracts are or contain leases, (iii) not to reassess the lease classification for any expired or existing leases, and (iv) not to reassess initial direct costs for any existing leases. Refer to Note 13, "Leases" for additional information.

 

We have lease agreements with lease and non-lease components, which are generally accounted for separately.

 

9

 

Goodwill and Intangible Assets

 

Goodwill represents the cost of acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. Goodwill is not amortized but is tested for impairment at least on an annual basis on December 31, based on a number of factors, including operating results, business plans, and future cash flows. The Company performs an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the assessment of events or circumstances, the Company performs a quantitative assessment of goodwill impairment if it determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the quantitative impairment analysis, the carrying value of a reporting unit exceeds the fair value of reporting units, an impairment loss is recognized in an amount equal to the excess. In addition, the Company performs a quantitative assessment of goodwill impairment between annual tests if an event occurs or circumstances change that would be more likely than not reduce the fair value of a reporting unit below its carrying amount. Refer to Note 3 for information and related disclosures.


Intangible assets acquired in a business combination were recorded at fair value at the acquisition date using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over the estimated useful lives and are reviewed for impairment at least annually, or more frequently if indicators of impairment arise.

 

Foreign Currency Matters

 

The Company has operations in Argentina and its functional currency has historically been the Argentine Peso. The Company monitors inflation rates in countries where it operates as required by U.S. GAAP. Under ASC 830-10-45-12, an economy must be classified as highly inflationary when the cumulative three-year rate exceeds 100%.  Considering the inflation data of Argentina, the Company has considered Argentina to be highly inflationary beginning on July 1, 2018. In accordance with ASC 830, the functional currency of the Argentina business has been changed to USD, which requires re-measurement of the local books to USD. Exchange gains and losses are recorded through net income instead of through other comprehensive income as had been done historically. Translation adjustments from periods prior to the change in functional currency were not removed from equity.

 

Investment in equity-accounted investees

 

Investment in equity accounted investee is an entity over which the Company has significant influence and which is neither a subsidiary nor a joint arrangement. Significant influence is the power to participate in financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

Investment in equity accounted investees are accounted for using equity method of accounting. Under the equity method, the investment in equity accounted investee is initially recognized at cost and adjusted thereafter for the post acquisition changes in the Company’s share of net assets of the equity accounted investees. Goodwill relating to investment in equity accounted investees, if any, is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.

 

In case of Limited Partnerships Investments, there is a specific SEC staff guidance which is included in ASC 323-30-S99-1 which provides that investments in all limited partnerships should be accounted for pursuant to paragraph 970-323-25-6. That guidance requires the use of the equity method unless the investor's interest "is so minor that the limited partner may have virtually no influence over partnership operating and financial policies."


The consolidated statement of income reflects the Company’s share of the results of operations of the equity accounted investees. When there has been a change recognized directly in the equity of the equity accounted investees, the Company recognizes its share of any changes and discloses this, when applicable, in the statement of stockholders' equity. Unrealized gains and losses resulting from transactions between the Company and the equity accountedinvestment are eliminated to the extent of the interest in the equity accounted investees. The Company’s share of profit/loss of equity accounted investee is shown on the face of the consolidated statement of income (loss).


The financial statements of the equity accounted investees are prepared for the same reporting period as the Company. When necessary, adjustments are made to bring the accounting policies in line with those of the Company. After application of the equity method, the Company determines at each reporting date whether there is any objective evidence that the investment in equity accounted investee is impaired, if there has been other than a temporary decline in carrying value. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the 'share of profit (loss) of equity accounted investee in the consolidated statement of income (loss)'. Refer to Note 14, "Investment in Equity-Accounted Investees" for additional information and related disclosures.

 

Stock-Based Compensation

 

We recognize expenses related to all share-based payments to employees, including grants of employee stock options, based on the grant-date fair values amortized straight-line over the period during which the employees are required to provide services in exchange for the equity instruments. We include an estimate of forfeitures when calculating compensation expenses. We use the Black-Scholes method for valuing stock-based awards. See Note 10, “Share-Based Compensation” for further information.

 

Common Stock Warrant Accounting

 

We account for common stock warrants as equity instruments, based on the specific terms of our warrant agreement. For more information refer to Note 10, "Share-Based Compensation." 

 

 

10

 

Consolidated Cash Flow Statement

 

The Company has aligned the cash flow for comparable period for rectifications made in the previous year to presentation of certain transactions arising from the debt re-financing and payment of call option premium.

 

In Q2 2021 a correction was made to present the payment of $3 million for call option to acquire a controlling stake in CSS Corp., as a reduction from cash flows from investing activities instead of the earlier presentation where such amount was reduced from cash flows from operating activities in Q1 2021. Further, in Q4 2021, a correction was made to present the payment of an amount of $8.5 million paid and expensed in the income statement, as debt issuance cost, as a reduction from cash flows from financing activities and a corresponding increase in cash flows from operating activities.

 

The effect of both the above reclassifications is an increase in cash flows from operating activities by $11.5 million and a corresponding decline in cash flows from investing activities and in cash flows from financing activities by $3 million and $8.5 million, respectively.

 

The Company has evaluated and concluded that the above corrections were not qualitatively material on previously filed quarterly consolidated financial statements. The above presentation errors within the consolidated statements of cash flows did not impact net income, comprehensive income, earnings per share, total equity, or the balance sheet and also detailed footnotes giving details related to both transactions have been given in all quarters and in the annual financial statements for the year ended December 31, 2021. Also, these presentation errors did not impact Company’s debt covenants, its net debt position, segment reporting and cash and cash equivalents.

 

Restructuring Charges

 

On an ongoing basis, management assesses the profitability and utilization of our facilities and in some cases, management has chosen to close facilities. Severance payments that occur from reductions in the workforce are in accordance with our post-employment policy and/or statutory requirements that are communicated to all employees; therefore, severance liabilities are recognized when termination of employment is communicated to the employee(s). Other liabilities for costs associated with an exit or disposal activity are recognized when the liability is incurred, instead of upon commitment to an exit plan. A significant assumption used in determining the amount of the estimated liability for closing a facility is the estimated liability for future lease payments on vacant facilities. We determine our estimate of sublease payments based on our ability to successfully negotiate early termination agreements with landlords, a third-party broker, or management’s assessment of our ability to sublease the facility based upon the market conditions in which the facility is located. If the assumptions regarding early termination and the timing and amounts of sublease payments prove to be inaccurate, we may be required to record additional losses, or conversely, a future gain. Refer to Note 6, "Impairment Losses and Restructuring/Exit cost" for additional information.

 

Reserves/Contingencies for Litigation and Other Matters

 

We are involved in few claims and legal actions, such as wage and hour, wrongful termination, and other employment-related claims, that arise in the ordinary course of business, some of which may be covered by insurance. The outcomes of these actions are not predictable, but we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity, or capital resources. We record an accrual for legal contingencies when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss. However, if there is a significant increase in the number of these claims, or if we incur greater liabilities than we currently anticipate under one or more claims, it could materially and adversely affect our business, financial condition, results of operations and cash flows.

 

Recent Accounting Pronouncements

 

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"), Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2022, and interim periods therein for smaller reporting companies. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

 

In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. The guidance is effective upon issuance and generally can be applied through December 31, 2022. This amendment shall apply to term loan obtained by the Company which are linked to LIBOR. The Company is closely monitoring the market and the announcements from the bank managing the transition to new benchmark interest rates for its term loan benchmarked to LIBOR. Based on announcements by bank, the transition will take effect. The Company is not expecting any material financial impact of transition from LIBOR to alternative benchmark rates on its floating rate borrowings linked to LIBOR.

 

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. This standard is effective for annual periods beginning after December 15, 2021 and should be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2021-10 within its Form 10-K for the fiscal year 2022.

 

 

 

3. GOODWILL AND INTANGIBLE ASSETS

 

Goodwill

 

The carrying value of goodwill is allocated to reporting units as follows:

 

Reporting Units

 

March 31, 2022

  

December 31, 2021

 

Americas

  64,315   64,315 

India

  12,554   12,554 

Malaysia

  47,543   47,543 

Saudi Arabia

  54,840   54,840 

Australia

  4,145   4,145 

Total

 $183,397  $183,397 

 

We perform a goodwill impairment analysis at least annually (in the fourth quarter of each year) unless indicators of impairment exist in interim periods. The assumptions used in the analysis are based on the Company’s internal budget. The Company projects revenue, operating margins, and cash flows for a period of five years and applies a perpetual long-term growth rate using discounted cash flows (DCF) method. These assumptions are reviewed annually as part of management’s budgeting and strategic planning cycles. These estimates may differ from actual results. 

 

As of March 31, 2022 and December 31, 2021, based on the management assessment, we concluded that there is no impairment of goodwill.

 

The following table presents the changes in goodwill during the three months ended March 31, 2022 and year ended December 31, 2021:

 

  

March 31, 2022

  

December 31, 2021

 

Opening balance

  183,397   183,397 

Impairment

  -   - 

Ending balance

 $183,397  $183,397 

 

Intangible Assets

 

The following table presents our intangible assets:

 

  

As of March 31, 2022

 
  

Gross Intangibles

  Accumulated Amortization  Net Intangibles  Weighted Average Amortization Period (years) 

Customer relationships

  66,220   23,273   42,947   6.5 

Brand

  49,500   15,978   33,522   7.1 

Trademarks

  13,210   3,256   9,954   7.5 

Other intangibles

  2,130   1,022   1,108   4.9 
  $131,060  $43,529  $87,531     

 

  

As of December 31, 2021

 
  

Gross Intangibles

  Accumulated Amortization  Net Intangibles  Weighted Average Amortization Period (years) 

Customer relationships

  66,220   21,887   44,333   6.5 

Brand

  49,500   15,074   34,426   7.1 

Trademarks

  13,210   3,036   10,174   7.5 

Other intangibles

  2,130   971   1,159   4.9 
  $131,060  $40,968  $90,092     

 

As of March 31, 2022, based on qualitative assessment, we concluded there is no impairment on the Company's intangible assets.

 

Expected future amortization of intangible as of  March 31, 2022 is as follows:

 

Years ending December 31,

 

Amount

 

Remainder of 2022

  7,762 

2023

  10,306 

2024

  10,252 

2025

  10,252 

2026

  9,490 

Thereafter

  39,469 

 

 

 

4.  REVENUE

 

The Company follows a five-step process in accordance with ASC 606, for revenue recognition that focuses on the transfer of control, rather than the transfer of risks and rewards.

 

Contracts with Customers

 

All of the Company's revenues are derived generally from written contracts with our customers. Our contracts document our customers' agreement to utilize our services and the relevant terms and conditions under which our services will be provided. Our contracts generally do not contain minimum purchase requirements nor do they include termination penalties. Our customers may generally cancel our contract, without cause, upon written notice (generally ninety days). While our contracts do have stated terms, because of the facts stated above, they are accounted for on a month-to-month basis.

 

Our contracts give us the right to bill for services rendered during the period, which for most of our customers is a calendar month, with a few customers specifying a fiscal month. Our payment terms vary by client and generally range from due upon receipt to 60-90 days.

 

Performance Obligations

 

We have identified one main performance obligation for which we invoice our customers, which is to stand ready to provide care services for our customers’ clients. A stand-ready obligation is a promise that a customer will have access to services as and when the customer decides to use them. Ours is considered a stand-ready obligation because the delivery of the underlying service (that is, receiving customer contact and performing the associated care services) is outside of our control or the control of our customer.

 

Our stand-ready obligation involves outsourcing of the entire customer care life cycle, including:

 

 

The identification, operation, management, and maintenance of facilities, IT equipment, and IT and telecommunications infrastructure

 

Management of the entire human resources function, including recruiting, hiring, training, supervising, evaluating, coaching, retaining, compensating, providing employee benefits programs, and disciplinary activities

 

These activities are all considered an integral part of the production activities required in the service of standing ready to accept calls as and when they are directed to us by our clients.

 

13

 

Revenue Recognition Methods

 

Because our customers receive and consume the benefit of our services as they are performed and we have the contractual right to invoice for services performed to date, we have concluded that our performance obligation is satisfied over time. Accordingly, we recognize revenue for our services in the month they are performed.

 

We are entitled to invoice for our services on a monthly basis. We invoice according to the hourly and/or per-transaction rates stated in each contract for the various activities we perform. Some contracts include opportunities to earn bonuses or include parameters under which we will incur penalties related to performance in any given month. Bonus or penalty amounts are based on the current month’s performance. Formulas are included in the contracts for the calculation of any bonus or penalty. There is no other performance in future periods that will impact the bonus or penalty calculation in the current period. We estimate the amount of the bonus or penalty using the “most likely amount” method and we apply this method consistently. The bonus or penalty calculated is generally approved by the client prior to billing (and revenue being recognized). The unbilled revenue, where the right to invoice has not accrued is recognized based on service delivery estimate.

 

Practical expedients and exemptions

 

Because the Company’s contracts are essentially month-to-month, we have elected the following practical expedients:

 

 

ASC 606-10-50-14 exempts companies from the disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less

 

ASC 340-40-25-4 allows companies to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

 

ASC 606-10-32-2A allows an entity to make an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value-added, and some excise taxes)

 

ASC 606-10-55-18 allows an entity that has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date (for example, a service contract in which an entity bills a fixed amount for each hour of service provided), the entity may recognize revenue in the amount to which the entity has a right to invoice.

 

Disaggregated Revenue

 

Revenues by our clients' industry verticals for the three months ended  March 31, 2022 and 2021 respectively:

 

  

Three Months Ended March 31,

 

Vertical:

 

2022

  

2021

 

Telecom

  56,051   51,674 

E-commerce & Consumer

  20,526   26,102 

Media & Cable

  16,942   25,794 

Financial & Business Services

  16,695   15,450 

Travel & Hospitality

  13,515   10,497 

Healthcare & Education

  11,463   17,687 

Technology, IT & Related Services

  5,345   5,081 

Other verticals

  26,780   11,210 

Gross revenue

  167,317   163,495 

Less: Warrant contra revenue

  -   (425)

Net revenue

 $167,317  $163,070 

 

 

 

5. NET INCOME / (LOSS) PER SHARE

 

Basic earnings per common share are computed based on our weighted average number of common shares outstanding. Diluted earnings per share are computed based on our weighted average number of common shares outstanding plus the effect of dilutive stock options, non-vested restricted stock, and deferred stock units, using the treasury stock method. 

 

When a net loss is reported, potentially issuable common shares are excluded from the computation of diluted earnings per share as their effect would be anti-dilutive.

 

For three months ended  March 31, 2022 and 2021, the following number of shares were used in the computation of basic and diluted earnings per share calculation (in thousands): 

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Shares used in basic earnings per share calculation

  40,338   40,592 

Effect of dilutive securities:

        

Stock options

  -   - 

Restricted stock/Deferred stock units

  -   - 

Total effects of dilutive securities

  -   - 

Shares used in dilutive earnings per share calculation

  40,338   40,592 

 

The Company always maintained Startek's 2008 Equity Incentive Plan (see Note 10, "Share-based compensation" for more information).

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Anti-dilutive securities:

        

Stock options

  3,030   2,099 

 

 

6. IMPAIRMENT LOSSES & RESTRUCTURING/EXIT COST

 

Impairment Loss

 

As of March 31, 2022, based on the management assessment, we concluded there is no impairment of goodwill.

 

Restructuring / Exit Cost

 

The table below summarizes the balance of accrued restructuring cost, voluntary/involuntary termination costs, and other exit-related costs, which are included in other accrued liabilities in our consolidated balance sheet. The changes during the three months ended  March 31, 2022 and the year ended December 31, 2021.

 

  

Employee related

  

Facilities related

  

Total

 

Balance as of December 31, 2021

  480   155   635 

Accruals/(reversals)

  1,232   175   1,407 

Payments

  (1,160)  (266)  (1,426)

Balance as of March 31, 2022

 $552  $64  $616 

 

  

Employee related

  

Facilities related

  

Total

 

Balance at December 31, 2020

  -   25   25 

Accruals/(reversals)

  3,519   193   3,712 

Payments

  (3,039)  (63)  (3,102)

Balance at December 31, 2021

 $480  $155  $635 

 

Employee related

 

In 2022, the Company has closed few of its facilities in Argentina, where we have terminated service of number of employees. We have recognized a provision for employee-related costs regarding the above termination. We expect to pay the remaining termination costs of $552 by the end of the fourth quarter of 2022.

 

Facility related

 

In 2022, the Company has recognized provision for the remaining costs associated with the lease that has been surrendered in Argentina. We expect to pay the remaining termination costs of $64 by the end of the second quarter of 2022.

 

 

 

7.  DERIVATIVE INSTRUMENTS

 

Cash flow hedges

 

Our locations in Canada and the Philippines primarily serve US-based clients. The revenues from these clients are billed and collected in US Dollars, but the expenses related to these revenues are paid in Canadian Dollars and Philippine Pesos. We had entered into derivative contracts, in the form of forward contracts and range forward contracts (a transaction where both a call option is purchased and a put option is sold) to mitigate this foreign currency exchange risk. The contracts covered periods commensurate with expected exposure, generally three to twelve months. We had elected to designate our derivatives as cash flow hedges to associate the hedges' results with forecasted expenses.

 

As of March 31,2022 and 2021, there were no derivative contract in effect.

 

  Gain (Loss) Recognized in AOCI, net of tax  Gain (Loss) Recognized in AOCI, net of tax  Gain (loss) reclassified from AOCI into Income  Gain (loss) reclassified from AOCI into Income 
  

Three Months Ended March 31, 2022

  

Three Months Ended March 31, 2021

  

Three Months Ended March 31, 2022

  

Three Months Ended March 31, 2021

 

Cash flow hedges:

                

Foreign exchange contracts

 $-  $-  $-  $8 

 

 

 

16

 

 

8.  FAIR VALUE MEASUREMENTS 

 

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The levels of the fair value hierarchy are described below:

 

Level 1 - Quoted prices for identical instruments traded in active markets.

 

Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

 

Level 3 - Unobservable inputs that cannot be supported by market activity and are significant to the fair value of the asset, liability, or equity such as the use of certain pricing models, discounted cash flow models, and similar techniques use significant assumptions. These unobservable inputs reflect our own estimates of assumptions that market participants would use in pricing the asset or liability:

 

Derivative Instruments

 

The values of our derivative instruments are derived from pricing models using inputs based upon market information, including contractual terms, market prices, and yield curves. The inputs to the valuation pricing models are observable in the market, and as such the derivatives are classified as Level 2 in the fair value hierarchy.

 

As of  March 31, 2022 and December 31, 2021, there were no derivative assets and liabilities.

 

 

 

 

 

9. DEBT

 

The below table presents details of the Company's debt:

 

  

March 31, 2022

  

December 31, 2021

 

Short term debt

        

Working capital facilities

  3,535   3,611 

Current portion of long term debt

        

Current maturity of long term loan

  8,250   4,125 

Current maturity of equipment loan

  1,667   1,682 

Current maturity of finance lease obligations

  299   434 

Total

 $13,751   9,852 
         

Long term debt

        

Term loan, net of debt issuance costs

  154,564  $158,543 

Equipment loan

  1,207   1,632 

Total

 $155,771  $160,175 

 

Working capital facilities

 

The Company has a number of working capital facilities in various countries in which it operates. These facilities provide for a combined borrowing capacity of approximately $30 million for a number of working capital products. These facilities bear interest at benchmark rate plus margins between 3.0% and 4.5% and are due on demand. These facilities are collateralized by various Company assets and have a total outstanding balance of $3.5 million as of March 31, 2022.

 

Term loan

 

On February 18, 2021, the Company completed a debt refinancing with a newly secured $185 million senior debt facility, comprising a $165 million term loan and a $20 million revolving credit facility. Under the new senior debt, borrowings will bear a tiered interest rate based on the Company’s consolidated net leverage ratio and is initially set at LIBOR plus 450 basis points.

 

The term loan facility amortizes 2.5% on the date that is 21, and 24 months from closing, 3.75% on the date that is 27, 30, 33, and 36 months from closing, 5.0% on the date that is 39, 42, 45, 48 and 51 months from closing, 10% on the date that is 54 months from closing and 15% on the date that is 57 months from closing and balance will be paid on the closure of term loan.

 

On February 22, 2021, the Company used proceeds from the above facilities agreement to prepay and terminate the existing credit facility made available to it under that certain Amended and Restated Senior Term and Revolving Facilities Agreement, dated October 27, 2017.

 

Principal payments due on the term loan are as follows:

 

Years

 

Amount

 

Remainder of 2022

  4,125 

2023

  22,688 

2024

  30,937 

2025

  57,750 

2026

  49,500 

Total

 $165,000 

 

The Term loan has a floating interest rate of USD LIBOR plus 4.5% annually for the first year and thereafter the margin will range between 3.75% and 4.5% subject to certain financial ratios.

 

In 2021, the Company incurred debt issuance costs of $11.3 million in connection with the new term loan. As per ASC 470, accounting guidance on term loan extinguishment, the Company has expensed off the debt issuance cost of $8.5 million paid to the lenders towards the new term loan and $2.5 million remaining unamortized debt issuance cost of the old term loan in interest expense, net in the consolidated statement of income (loss). Debt issuance costs paid to the Company’s counsel and other third parties of $2.8 million is being amortized over the period of the new term loan. The balance unamortized portion of such costs as of March 31, 2022, amounted to $2.2 million which has been netted off against long-term debt on the consolidated balance sheet.

 

The Term loan is subject to certain covenants, whereby the Company is required to meet certain financial ratios and obligations on a quarterly basis. As of March 31, 2022, the Company was in compliance with all financial covenants.

 

Following table presents the changes in debt issuance cost during the three months ended  March 31, 2022 and the year ended December 31, 2022:

 

  

March 31, 2022

  

December 31, 2021

 

Opening balance

  2,332   2,670 

Add: Debt issuance cost (refinancing of term loan)

  -   11,269 

Less: Expensed out (ASC 470 - extinguishment or modification)

  -   (10,937)

Less: Amortization of debt issuance cost

  (146)  (670)

Closing balance

  2,186   2,332 

 

18

 

Non-recourse factoring

 

We have entered into factoring agreements with financial institutions to sell certain of our accounts receivable under non-recourse agreements. Under the arrangement, the Company sells the trade receivables on a non-recourse basis and accounts for the transactions as sales of receivables. The applicable receivables are removed from the Company's consolidated balance sheet when the Company receives the cash proceeds. We do not service any factored accounts after the factoring has occurred. We utilize factoring arrangements as part of our management of working capital. The balance of funds received from factored receivables under these agreements was $17.8 million and $21.6 million as of March 31, 2022 and December 31, 2021, respectively.

 

BMO Equipment Loan

 

On December 27, 2018, the Company executed an agreement to secure a loan against US and Canadian assets for $2.06 million at the interest of 7.57% per annum, to be repaid over 2.5 years. The loan was funded in January 2019. The amount outstanding as of March 31, 2022 is $0.025 million.

 

Equipment Loan

 

On November 2, 2020, the Company executed Master Equipment Finance Agreement to finance the purchase of equipment for $4 million at the interest of 5.27% per annum with a maturity date 34 months after the date of first utilization of equipment loan. The amount outstanding as of March 31, 2022 is $2.8 million.

 

Finance lease obligations

 

From time to time and when management believes it to be advantageous, we may enter into other arrangements to finance the purchase or construction of capital assets.

 

 

 

10. SHARE-BASED COMPENSATION

 

Amazon Warrant

 

On January 23, 2018, Startek entered into the Amazon Transaction Agreement, pursuant to which we agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly-owned subsidiary of Amazon, a warrant (the “Warrant”) to acquire up to 4,000,000 shares of our common stock, subject to certain vesting events. The vesting of the Warrant shares is linked to payments made by Amazon or its affiliates pursuant to a service contract. Since no vesting event occurred in the fiscal year 2021 and we do not anticipate additional vesting in the near future, the Company had not accrued any contra revenue as per ASC 606.

 

Share-based compensation

 

Our share-based compensation arrangements include grants of stock options, restricted stock units and deferred stock units under the Startek, Inc. 2008 Equity Incentive Plan and our Employee Stock Purchase Plan. The compensation expense that has been charged against income for the three months ended March 31, 2022, was $428 and is included in selling, general and administrative expense. As of March 31, 2022, there was $3,590 of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.5 years.

 

 

 

11.  ACCUMULATED OTHER COMPREHENSIVE LOSS

 

Accumulated other comprehensive loss consists of the following items:

 

  

Foreign Currency Translation Adjustment

  

Defined Benefit Plan

  

Equity attributable to Startek shareholders

  

Non-controlling interests

  

Total

 

Balance at December 31, 2021

  (6,816)  (3,871)  (10,687)  (3,887)  (14,574)

Foreign currency translation

  548   -   548   -   548 

Reclassification to operations

  -   -   -   -   - 

Pension remeasurement

  -   (482)  (482)  (655)  (1,137)

Balance at March 31, 2022

 $(6,268) $(4,353) $(10,621) $(4,542) $(15,163)

 

 

 

12.  SEGMENT REPORTING

 

The Company provides business process outsourcing services (“BPO”) to clients in various industries and geographical locations. Our approach is focused on providing our clients with the best possible combination of services and delivery locations to meet our clients' needs in the best and most efficient manner. Our Global Chief Executive Officer (CEO) who has been identified as the Chief Operating Decision Maker ("CODM"), reviews financial information mainly on a geographical basis.

 

Our operating business model is focused on the geographies in which we operate. Our CODM reviews the performance and makes resource allocation geography-wise, hence the geographical level represents the operating segments of Startek Inc.

 

We report our results of operations in six reportable segments, as follows:


a) Americas
b) India and Sri Lanka
c) Malaysia 
d) Middle East 
e) Argentina & Peru
f) Rest of World

 

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 

Revenue:

        

Americas

  45,415   63,925 

India & Sri Lanka

  27,961   21,482 

Malaysia

  11,280   14,965 

Middle East

  58,687   43,240 

Argentina & Peru

  8,305   8,159 

Rest of World

  15,669   11,299 

Total

 $167,317  $163,070 

 

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 

Operating income (loss):

        

Americas

  (2,319)  1,895 

India & Sri Lanka

  3,467   (1,228)

Malaysia

  2,026   4,414 

Middle East

  4,300   5,741 

Argentina & Peru

  (2,320)  (43)

Rest of World

  1,676   399 

Segment operating income

  6,830   11,178 

Startek consolidation adjustments

        

Private offer transaction cost

  (500)  - 

Intangible amortization

  (2,561)  (2,560)

Total operating income

 $3,769  $8,618 

 

A single client accounted for 18% and 19% of  the consolidated total net revenue during the three months ended March 31, 2022 and 2021, respectively.

 

Property, plant and equipment, net by geography based on the location of the assets are presented below:

 

 

  As of  As of 
  March 31, 2022  December 31, 2021 

Property, plant and equipment, net:

        

Americas

  10,275   11,335 

India & Sri Lanka

  9,132   8,712 

Malaysia

  2,799   2,818 

Middle East

  6,246   7,461 

Argentina & Peru

  1,292   1,453 

Rest of World

  2,588   2,389 

Total

 $32,332  $34,168 

 

 

 

13.  LEASES

 

We have operating and finance leases for service centers, corporate offices, and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases for up to 3-5 years, and some of which include options to terminate the leases within 1 year.

 

The components of lease expense were as follows:

 

  

Three Months Ended March 31, 2022

  

Three Months Ended March 31, 2021

 
         

Operating lease cost

 $5,863  $6,809 
         

Finance lease cost:

        

Amortization of right-of-use assets

  143   185 

Interest on lease liabilities

  60   17 

Total finance lease cost

 $203  $202 

 

Supplemental cash flow information related to leases was as follows:

 

  Three Months Ended March 31, 2022  Three Months Ended March 31, 2021 

Cash paid for amounts included in the measurement of lease liabilities:

        

Operating cash flows from operating leases

  5,979   6,782 

Operating cash flow from finance leases

  60   17 

Financing cash flows from finance leases

  135   203 
         

Right-of-use assets obtained in exchange for lease obligations:

        

Operating leases

  

1,491

   

2,003

 

Finance leases

  -   - 

 

Supplemental balance sheet information related to leases was as follows:

 

  

As of March 31, 2022

  

As of December 31, 2021

 

Operating leases

        

Operating lease right-of-use assets

 $59,299  $63,012 
         

Operating lease liabilities - Current

  24,052   24,393 

Operating lease liabilities - Non-current

  40,745   44,263 

Total operating lease liabilities

 $64,797  $68,656 
         

Finance Leases

        

Property and equipment, at cost

  4,124   4,128 

Accumulated depreciation

  (3,725)  (3,641)

Property and equipment, at net

 $399  $487 
         

Finance lease liabilities - Current

  299   434 

Finance lease liabilities - Non-current

  -   - 

Total finance lease liabilities

 $299  $434 

 

Weighted average remaining lease term

 

As of March 31, 2022

  

As of December 31, 2021

 

Operating leases (in years)

 3.42 years  3.58 years 

Finance leases (in years)

 0.00 years  0.00 years 
         

Weighted average discount rate

        

Operating leases

  6.9%  6.8%

Finance leases

  0.0%  0.0%

 

The following table reconciles the undiscounted cash flows for the Company’s finance and operating leases as of March 31, 2022, to the finance and operating lease liabilities recorded on the Company’s balance sheet:

 

  

Operating Leases

  

Finance Leases

 

Year ending December 31,

        

Remainder of 2022

  19,266   304 

2023

  21,390   - 

2024

  17,274   - 

2025

  9,546   - 

2026

  2,846   - 

Thereafter

  2,101   - 

Total lease payments

  72,423   304 

Less imputed interest

  (7,626)  (5)

Total

 $64,797  $299 

 

 

 

14.  INVESTMENT IN EQUITY-ACCOUNTED INVESTEES

 

Following are the entity wise details of equity-accounted investees:

 

  

% of ownership interest

  

Carrying amount

 

Name of entity

 

March 31, 2022

  

December 31, 2021

  

March 31, 2022

  

December 31, 2021

 

a) CSS Corp LP

  61.35%  61.35%  31,680   31,688 

b) Immaterial associates

          -   - 

Carrying amount of investment in equity-accounted investees

          31,680   31,688 

 

  

Three months ended March 31, 2022

  

Three months ended March 31, 2021

 

Aggregate amounts of the group’s share of profit/ (loss) of equity-accounted investees

  (8)  (14)

 

a) CSS Corp LP

 

On February 25, 2021, the Company announced a $25 million strategic minority investment in CSS Corp. (“CSS”), a new-age IT services and technology support solutions company that harnesses the power of AI, automation, analytics, cloud, and digital to address customer needs. Through this investment, Startek acquired an indirect beneficial interest in CSS of approximately 26%, with Capital Square Partners (“CSP” or “CSP Fund”), a Singapore-based Private Equity Fund Manager, and the Company’s majority shareholder, acquiring the majority controlling stake.

 

The Company and CSP Alpha Holdings Pte. Ltd., a subsidiary of the Company, participated in this transaction by (i) contributing $25 million to acquire approximately 62.5%* in CSS Corp LP, and (ii) paying $5 million to CSP Management Limited to acquire certain call options. These call options to acquire a controlling stake in CSS are only exercisable by the Company during the period from August 19, 2022, to April 19, 2023, without any obligation and are currently considered to be not substantive.

 

*Subsequently reduced to 61.35%

 

The Company has assessed CSS Corp LP to be a variable interest entity (‘VIE’) and per ASC 810-10-25-44 concluded that it is not the primary beneficiary. Amongst other factors, the Company’s basis of this conclusion is that it lacks the power to direct or control any significant activities of the VIE and that the design and structure of the VIE were not specifically for the benefit of the Company. Further, CSS Corp LP’s objectives as an investment company is an extension of the investment activities of CSP Fund. The Company has accordingly, accounted for this transaction under the equity-accounted investee method of accounting in accordance with ASC 323-30-S99-1. The Company's share of profit/loss of equity-accounted investee is accounted under the “equity method” as per which the share of profit/(loss) of equity-accounted investee has been added to the cost.

 

Summarised financial position

     
   

March 31, 2022

 

December 31, 2021

Current assets

  

42

 

42

Non-current assets

  

51,690

 

51,690

Current and non-current liabilities

  

(93)

 

(80)

Net assets

  

51,639

 

51,652

      

Company share in %

  

61.35%

 

61.35%

Company share

  

31,680

 

31,688

Carrying amount of investment in equity-accounted investee