News & Insight

STARTEK Reports Fourth Quarter and Full Year 2014 Results

GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Feb. 19, 2015-- StarTek, Inc. ("STARTEK") (NYSE:SRT), a provider of high-value business process outsourcing services, has reported its fourth quarter and full year 2014 financial results.

2014 Highlights

17 new clients signed with $48.6 million of annual contract value
Revenue from verticals excluding telecommunications/cable and media increased 150% to $25.9 million, exiting the year at 17.4% of revenue
Improved geographical footprint with net capacity expansion of 2,000 new seats
Improved diversification with 24% growth in receivables management and back office revenue
Adjusted EBITDA was up 20%

Fourth Quarter 2014 Financial Results

Total revenue in the fourth quarter of 2014 increased to $64.2 million compared to $63.4 million in the fourth quarter of 2013. This was the result of $3.1 millionof growth in receivables management and back office work and $8.0 million of growth in healthcare, education, financial services, and retail verticals. The acquisition of Collections Center, Inc. during the fourth quarter of 2014 contributed to this growth. This was partially offset by declines of $10.3 million in core services for telecommunications/cable clients associated with the Costa Rica facility closure, lower than forecasted call volumes and program mix changes. The client mix and mature wages made it difficult to be profitable in Costa Rica.

Gross margin in the fourth quarter of 2014 was 11.7% compared to 11.8% in the year-ago quarter. Current quarter gross margin reflects a 280 basis point impact from expenses related to client start-up and capacity expansion. Excluding this dilutive impact of on-boarding new clients and capacity investments, gross margin was 14.5%, an increase of 270 basis points as compared to the fourth quarter of 2013.

Selling, general and administrative (SG&A) expenses increased to $8.3 million in the fourth quarter of 2014 compared to $7.2 million in the year-ago quarter. Selling expense increases associated with new revenue was approximately $0.5 million and investment in growth initiatives was $0.4 million. As a percentage of revenue, SG&A was 13.0% compared to 11.4% in the year-ago quarter.

Fourth quarter 2014 Adjusted EBITDA of $2.3 million compares to a fourth quarter 2013 Adjusted EBITDA of $3.6 million. The decline was due to the aforementioned growth-related investment.

At December 31, 2014, the company’s cash position was $5.3 million compared to $11.0 million at December 31, 2013. The reduction was due to the increase in capital expenditures for new facilities and increased capacity, $3.4 million of cash payments for acquisitions and restructuring payments of $4.0 million.

2014 Financial Results

Total revenue in 2014 increased 8% to $250.1 million compared to $231.3 million in 2013.

Gross margin increased 170 basis points to 12.2% in 2014 compared to 10.5% in 2013.

SG&A expenses increased to $31.4 million in 2014 compared to $28.8 million in 2013. As a percentage of revenue, SG&A remained relatively flat at 12.6% compared to 12.5% in 2013.

Adjusted EBITDA in 2014 increased 20% to $11.5 million compared to $9.6 million in 2013.

Management Commentary

“Increasing capacity in the right locations and diversifying our revenue are important and necessary steps to building a profitable company,” said Chad Carlson, president and CEO of STARTEK. “Continued enhancements to the STARTEK Advantage System are enabling us to provide more valuable services to an increasing number of verticals. We have closed unhealthy sites which hindered our ability to attain profitable growth and are expanding in locations, verticals and services which can attain better margins."

“As we enter 2015,” Carlson continued, “we will continue to invest in growth and are confident our strategy will build a profitable and more diversified STARTEKthat delivers clients high-value services."

Conference Call and Webcast Details

STARTEK will hold a conference call today at 5:00 p.m. Eastern time to discuss its fourth quarter and full year 2014 results. Management will host the conference call, followed by a question and answer period.

Date: Thursday, February 19, 2015
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Toll-free dial-in number: 1-866-515-2914
International dial-in number: 1-617-399-5128
Conference ID: 37868293

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 1-949-574-3860.

The conference call will be broadcast live and available for replay via the investor relations section of the STARTEK website. A replay of the conference call will be available after 9:00 p.m. Eastern time on the same day through February 26, 2015.

Toll-free replay number: 1-888-286-8010
International replay number: 1-617-801-6888
Replay ID: 70121751

About STARTEK

STARTEK is a trusted service provider with contact centers around the world. Our employees, whom we call Brand Warriors, protect and promote our clients' brands. These Brand Warriors are committed to making a positive impact for our clients’ business results, enhancing the customer experience while reducing costs for our clients. With our STARTEK Advantage System, our Brand Warriors instill customer loyalty through a variety of multi-channel customer interactions, including voice, chat, email and social media. Our service offerings include sales support, order processing, customer care, technical support and receivables management. For more information, please visit http://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. 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, 2013 and the Company's Form 10-Q for the quarter ended September 30, 2014 filed with theSecurities and Exchange Commission, for further information on risks and uncertainties that could affect STARTEK's business, financial condition and results of operation.