Attached files
| file | filename |
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| EX-99.2 - EXHIBIT 99.2 - Startek, Inc. | srt_ex99-22018630.htm |
| 8-K - 8-K - Startek, Inc. | srt8-k2018630.htm |
Exhibit 99.1
STARTEK Reports Second Quarter 2018 Results
GREENWOOD VILLAGE, CO - August 7, 2018 - Startek, Inc. (NYSE:SRT), a global provider of business process outsourcing services, is reporting financial results for the second quarter ended June 30, 2018, and providing an update on its recently completed strategic combination with Aegis.
Startek Second Quarter 2018 Summary (vs. year-ago quarter)
• | Total revenue was $59.7 million compared to $74.0 million. |
• | Gross profit was $5.2 million compared to $9.0 million, with gross margin of 8.8% compared to 12.1%. |
• | Net loss was $3.7 million or $(0.23) per share, compared to net income of $0.6 million or $0.03 per share. |
• | Adjusted EBITDA* was $0.7 million compared to $4.4 million. |
Subsequent Event: Key Highlights of Combination with Aegis
• | On July 20, 2018, Startek completed its strategic combination with Capital Square Partners (CSP) portfolio company, Aegis, to create a global BPO platform with differentiation, scale and a diverse customer base |
• | Combined 2017 revenue of approximately $700 million and adjusted EBITDA of approximately $50 million |
• | Top three customers now represent less than 30% of total revenue compared to 53% for Startek in 2017. |
• | Synergies expected to drive incremental $30 million in EBITDA by 2020 through enhanced revenue growth and cost savings. |
• | Startek shareholders own approximately 45% of the combined company, while CSP owns approximately 55%. |
Management Commentary
“The combination of STARTEK and Aegis has created a truly global platform with more than 50,000 employees operating in 13 countries and servicing six continents,” said Lance Rosenzweig, president & global CEO of Startek. “This provides unprecedented benefits to all stakeholders, including clients, shareholders and employees.
“Our clients will reap the benefit of our global reach and access to new markets, multi-lingual offerings and technology-led innovations. Our shareholders can expect the diversification of our client base, added scale and operational synergies to enhance margins and profitability, while providing considerable cross-sell opportunities to accelerate growth. And our employees will now become part of an even larger organization with vast opportunities for professional development.
“The timing of this combination was also important given the challenges to Startek’s business over the last year. In the second quarter, the company continued to work through lower volumes and lost programs from its top wireless clients, which impacted both revenue and profitability. The wireless industry continues to face disruption, which has resulted in a rapidly evolving environment for service providers. These soft volumes were partially offset by strong growth from cable/media and retail clients, as well as the early benefit of ramping one of the large, strategic client wins announced earlier in the year. Going forward, we expect our combined business to be much less volatile, as no one client will represent more than 10% of revenue.
“We still have plenty of work ahead to replace the lost wireless programs and to integrate talent, experience, products and services across the combined organization. It will take several quarters to realize the benefits of our new global scale and footprint. Nevertheless, I strongly believe that our combined resources will enable world-class customer support for clients and produce operational synergies throughout the organization, which will drive growth and enhance profitability down the road. The opportunities ahead for Startek are just beginning, and I look forward to leading the team and all stakeholders into this next chapter of growth.”
Second Quarter 2018 Financial Results
Total revenue in the second quarter was $59.7 million compared to $74.0 million in the year-ago quarter. The decrease was primarily due to lower call volumes and lost programs from the company’s wireless clients, partially offset by new business and growth from existing clients.
Gross margin in the second quarter was 8.8% compared to 12.1% in the year-ago quarter, with the decline primarily due to the aforementioned lower wireless volumes and lost programs, as well as discounted training related to on-boarding a new client.
Selling, general and administrative (SG&A) expenses were $7.0 million compared to $8.2 million in the year-ago quarter. As a percentage of revenue, SG&A was 11.7% compared to 11.0%.
Net loss for the second quarter was $3.7 million or $(0.23) per share, compared to net income of $0.6 million or $0.03 per share in the year-ago quarter. Adjusted net loss* in the second quarter was $2.2 million compared to adjusted net income of $1.0 million.
Adjusted EBITDA* in the second quarter was $0.7 million compared to $4.4 million in the year-ago quarter. The decline was primarily due to the aforementioned factors impacting revenue and gross margin.
At June 30, 2018, the company’s cash position was $1.3 million compared to $1.5 million at December 31, 2017. Startek closed the quarter with a $27.7 million balance on its $50 million credit facility compared to $19.1 million outstanding at December 31, 2017.
*A non-GAAP measure defined below
Conference Call and Webcast Details
Startek management will hold a conference call today at 4:30 p.m. Eastern time to discuss its second quarter 2018 results and recently completed strategic combination with Aegis. The conference call will be followed by a question and answer period.
Date: Tuesday, August 7, 2018
Time: 4:30 p.m. Eastern time (2:30 p.m. Mountain time)
Toll-free dial-in number: (844) 239-5283
International dial-in number: (574) 990-1022
Conference ID: 1739269
During the call, Startek management will refer to a supplementary slide presentation, which will be available for download in the Investors section of the company's website.
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 Liolios Group 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 7:30 p.m. Eastern time on the same day through August 14, 2018.
Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 1739269
About Startek
Startek is a leading global provider of Customer Experience Management through business process outsourcing (BPO) services and technology services to corporations across a range of industries. Operating under the Startek and Aegis brands, the company has more than 50,000 support experts across 66 contact center locations worldwide that are committed to enhancing the customer experience for clients. This is accomplished through a variety of multi-channel customer interactions, including voice, chat, email and IVR. The company also provides sales support, order processing, receivables management and social media analytics to power 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. These factors include, but are not limited to, risks relating to our reliance on a limited number of significant customers, lack of minimum purchase requirements in our contracts, the concentration of our business in the communications industry, lack of wide geographic diversity, maximization of capacity utilization, foreign currency exchange risk, risks inherent in the operation of business outside of the United States, ability to hire and retain qualified employees, increases in labor costs, management turnover and retention of key personnel, trends affecting companies’ decisions to outsource non-core services, reliance on technology and computer systems, including investment in and development of new and enhanced technology, increases in the cost of telephone and data services, unauthorized disclosure of confidential client or client customer information or personally identifiable information, compliance with regulations governing protected health information, our ability to acquire and integrate complementary businesses, compliance with our debt covenants, ability of our largest stockholder to affect decisions and stock price volatility, difficulties with the successful integration and realization of the anticipated benefits or synergies from the Aegis transaction, and the risk that the consummation of the transaction could have an adverse effect on Startek’s ability to retain customers and retain and hire key personnel. Readers are encouraged to review Item 1A. - Risk Factors and all other disclosures appearing in the Company's Form 10-K for the year ended December 31, 2017 filed with the SEC and in other filings with the SEC, for further information on risks and uncertainties that could affect Startek's business, financial condition and results of operation. 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 or Cody Slach
Liolios
949-574-3860
investor@startek.com
STARTEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue | $ | 59,717 | $ | 73,979 | $ | 128,831 | $ | 151,631 | ||||||||
Warrant contra revenue | — | — | (2,500 | ) | — | |||||||||||
Net revenue | 59,717 | 73,979 | 126,331 | 151,631 | ||||||||||||
Cost of services | 54,491 | 64,992 | 115,646 | 132,630 | ||||||||||||
Gross profit | 5,226 | 8,987 | 10,685 | 19,001 | ||||||||||||
Selling, general and administrative expenses | 6,990 | 8,171 | 15,549 | 16,053 | ||||||||||||
Transaction related fees | 1,020 | — | 2,907 | — | ||||||||||||
Impairment losses and restructuring charges, net | 512 | 412 | 4,965 | 412 | ||||||||||||
Operating income (loss) | (3,296 | ) | 404 | (12,736 | ) | 2,536 | ||||||||||
Interest and other expense, net | (392 | ) | 84 | (830 | ) | (283 | ) | |||||||||
Income (loss) before income taxes | (3,688 | ) | 488 | (13,566 | ) | 2,253 | ||||||||||
Income tax expense (benefit) | 17 | (66 | ) | 165 | (94 | ) | ||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Net income (loss) per common share - basic | $ | (0.23 | ) | $ | 0.03 | $ | (0.85 | ) | $ | 0.15 | ||||||
Weighted average common shares outstanding - basic | 16,214 | 15,916 | 16,204 | 15,866 | ||||||||||||
Net income (loss) per common share - diluted | $ | (0.23 | ) | $ | 0.03 | $ | (0.85 | ) | $ | 0.14 | ||||||
Weighted average common shares outstanding - diluted | 16,214 | 17,247 | 16,204 | 17,127 | ||||||||||||
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,336 | $ | 1,456 | ||||
Trade accounts receivable, net | 51,812 | 53,052 | ||||||
Other current assets | 3,394 | 3,641 | ||||||
Total current assets | 56,542 | 58,149 | ||||||
Property, plant and equipment, net | 16,265 | 19,943 | ||||||
Other long-term assets | 15,273 | 17,906 | ||||||
Total assets | $ | 88,080 | $ | 95,998 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | $ | 22,622 | $ | 25,948 | ||||
Other liabilities | 30,209 | 23,111 | ||||||
Total liabilities | 52,831 | 49,059 | ||||||
Total stockholders’ equity | 35,249 | 46,939 | ||||||
Total liabilities and stockholders’ equity | $ | 88,080 | $ | 95,998 | ||||
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating Activities | ||||||||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 2,293 | 2,771 | 4,936 | 5,733 | ||||||||||||
Share-based compensation expense | 224 | 301 | 487 | 530 | ||||||||||||
Warrant contra revenue | $ | — | — | $ | 2,500 | — | ||||||||||
Changes in operating assets & liabilities and other, net | (18 | ) | 375 | 984 | 2,574 | |||||||||||
Net cash (used in) provided by operating activities | $ | (1,206 | ) | $ | 4,001 | $ | (4,824 | ) | $ | 11,184 | ||||||
Investing Activities | ||||||||||||||||
Purchases of property, plant and equipment | (1,030 | ) | (941 | ) | (2,972 | ) | (2,054 | ) | ||||||||
Proceeds from sale of assets | — | — | — | 342 | ||||||||||||
Net cash used in investing activities | $ | (1,030 | ) | $ | (941 | ) | $ | (2,972 | ) | $ | (1,712 | ) | ||||
Financing Activities | ||||||||||||||||
Other financing, net | 2,350 | (2,549 | ) | 7,449 | (8,624 | ) | ||||||||||
Net cash provided by (used in) financing activities | $ | 2,350 | $ | (2,549 | ) | $ | 7,449 | $ | (8,624 | ) | ||||||
Effect of exchange rate changes on cash | 26 | 14 | 227 | 2 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 140 | 525 | (120 | ) | 850 | |||||||||||
Cash and cash equivalents at beginning of period | $ | 1,196 | $ | 1,364 | $ | 1,456 | $ | 1,039 | ||||||||
Cash and cash equivalents at end of period | $ | 1,336 | $ | 1,889 | $ | 1,336 | $ | 1,889 | ||||||||
STARTEK, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands)
(Unaudited)
This press release contains references to the non-GAAP financial measures of Adjusted EBITDA, Adjusted gross profit, and Adjusted net income (loss). Reconciliation of these non-GAAP measures to their comparable GAAP measures are 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 income (loss) plus Income tax expense (benefit), Impairment losses and restructuring charges, net, Interest expense, Depreciation and amortization expense, Share-based compensation expense, Fees and expenses related to the transactions, Warrant contra revenue, less gain on sale of assets. Management uses Adjusted EBITDA as a performance measure to analyze the performance of our business. Management believes that excluding these non-cash and other non-recurring items permits a more meaningful comparison and understanding of our strength and performance of our ongoing operations for our investors and analysts.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Income tax expense (benefit) | 17 | (66 | ) | 165 | (94 | ) | ||||||||||
Impairment losses and restructuring charges, net | 512 | 412 | 4,965 | 412 | ||||||||||||
Interest expense | 391 | 414 | 782 | 832 | ||||||||||||
Depreciation and amortization expense | 2,293 | 2,771 | 4,936 | 5,733 | ||||||||||||
Gain on sale of assets | (29 | ) | — | (29 | ) | — | ||||||||||
Share-based compensation expense | 224 | 301 | 487 | 530 | ||||||||||||
Transaction related fees | 1,020 | — | 2,907 | — | ||||||||||||
Warrant contra revenue | — | — | 2,500 | — | ||||||||||||
Adjusted EBITDA | $ | 723 | $ | 4,386 | $ | 2,982 | $ | 9,760 | ||||||||
Adjusted gross profit:
The Company defines non-GAAP Adjusted gross profit as Gross profit plus Warrant contra revenue. Below is a reconciliation of Gross profit to Adjusted gross profit:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Gross profit | 5,226 | 8,987 | 10,685 | 19,001 | ||||||||||||
Warrant contra revenue | — | — | (2,500 | ) | — | |||||||||||
Adjusted gross profit | $ | 5,226 | $ | 8,987 | $ | 8,185 | $ | 19,001 | ||||||||
Adjusted net income (loss):
The Company defines non-GAAP Adjusted net income (loss) as Net income (loss) plus Warrant contra revenue, Impairment losses and restructuring charges, net, and fees and expenses related to the Aegis and Amazon transactions. Below is a reconciliation of Net income (loss) to Adjusted net income (loss):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Warrant contra revenue | — | — | (2,500 | ) | — | |||||||||||
Impairment losses and restructuring charges, net | 512 | 412 | 4,965 | 412 | ||||||||||||
Transaction related fees | 1,020 | — | 2,907 | — | ||||||||||||
Adjusted net income (loss) | $ | (2,173 | ) | $ | 966 | $ | (8,359 | ) | $ | 2,759 | ||||||