Startek Reports Third Quarter 2020 Financial Results

  • Sequential Quarterly Improvements Across Key Financial Metrics Demonstrate Continued Progress of Recovery
  • Focus on Cost Management and Digital Optimization Drives Strong Operational Momentum


GREENWOOD VILLAGE, CO – November 9, 2020 - Startek, Inc. (NYSE:SRT), a global provider of customer experience management solutions, is reporting financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights ($ in millions)

 

Q3 2020

Q2 2020

Q3 2019

Net Revenue

$162.7

$142.2

$164.6

Gross Profit

$22.9

$15.8

$28.5

Gross Margin

14.1%

11.1%

17.3%

SG&A Expenses

$14.9

$14.6

$22.9

Net Income/(Loss)1

$0.4

$(5.2)

$(2.8)

Adjusted EBITDA2

$15.6

$8.8

$13.4

Note
1 Reflects net income (loss) attributable to Startek shareholders.
2 Refer to the note below about Non-GAAP financial measures.

Management Commentary

“Our third quarter performance demonstrates our continued progress in recovering from the pandemic and further improving operational efficiency,” said Aparup Sengupta, Executive Chairman and Global CEO of Startek. “We drove sequential quarterly improvements across all key financial metrics, as well as significant year-over-year growth on the bottom line. Further, we are operating at close to full strength relative to pre-COVID levels, with over 90% of our global workforce now active in either remote or on-campus environments. I am proud of our team’s agility and deep commitment to maintaining the quality and continuity of our services during this challenging period.

“The operational improvements and digital initiatives we have implemented over the past several quarters have allowed us to expand our scope of work within our core verticals and launch several new client programs, all while maintaining a keen focus on cost management. This has been further supported by continued robust demand in the e-commerce and healthcare sectors, where clients are increasingly leveraging our differentiated, rapidly evolving digital solutions. Our recently introduced StarCloud omnichannel platform also continues to provide a seamless and secure customer experience for our clients by enabling remote work environments for our teams across the globe.

“Looking ahead, we expect our digital initiatives to be a key driver of both future revenue growth and operating leverage, as we believe the hybrid remote work structure is here to stay for the long-term. As such, we have recently reduced our physical capacity by nearly 10%. We remain well prepared for a resurgence in COVID-19 cases within any of our geographies, as we now have the flexibility to quickly pivot operations with our StarCloud technology. With a strong foundation in place, we believe we are in the early innings of the next phase of growth for Startek as we look to carry our momentum into next year.”

Third Quarter 2020 Financial Results

Net revenue in the third quarter was $162.7 million compared to $164.6 million in the third quarter of 2019. The slight decrease was driven by depreciation of the Argentina Peso & the Indian Rupees, warrant contra revenue and the continued impact of COVID-19 lockdowns and lower active workforce in certain geographies. On a constant currency basis, net revenue increased 3.5% compared to the prior year period.

Gross profit in the third quarter was $22.9 million compared to $28.5 million in the year-ago quarter. Gross margin was 14.1% compared to 17.3% in the year ago quarter. The decrease was primarily driven by higher outsourcing, contract, maintenance and communication expenses, partially offset by lower travelling and recruitment costs.

Selling, general and administrative (SG&A) expenses in the third quarter decreased to $14.9 million compared to $22.9 million in the year-ago quarter. As a percentage of revenue, SG&A improved 480 basis points to 9.1% compared to 13.9% in the year-ago quarter as a result of the cost reductions the company has implemented over the last 12 months and in response to COVID-19.

Net income attributable to Startek shareholders in the third quarter increased significantly to $0.4 million or $0.01 per diluted share, compared to a net loss of $2.8 million or $(0.07) per share in the year-ago quarter. The increase was driven by prudent expense management throughout the organization.

Adjusted net income* in the third quarter increased significantly to $3.3 million, or $0.08 per diluted share, compared to an adjusted net loss* of $0.5 million or $(0.01) per share in the year-ago quarter.

Adjusted EBITDA* in the third quarter increased 16.8% to $15.6 million compared to $13.4 million in the year-ago quarter. The increase was primarily driven by the aforementioned cost reductions and focus on prudent expense management.

On September 30, 2020, cash and restricted cash increased slightly to $56.6 million compared to $56.4 million at June 30, 2020. The increase is primarily the result of continued tight control over costs and accounts payable and deferred principal debt payments. Total debt at the end of the quarter reduced to $136.0 million compared to $149.9 million at June 30, 2020, primarily due to lower drawdowns of the revolver and working capital facilities. As a result, net debt at September 30, 2020 reduced to $79.4 million compared to $93.5 million at June 30, 2020. Per conditions of the company’s Restated Senior Debt agreement, Startek plans to make a $4.2 million principal repayment in November that was previously deferred.

*A non-GAAP measure defined below.

About Startek
Startek is a global provider of tech-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 & AI enablement across all touch points and channels. Startek has more than 40,000 CX experts spread across 46 delivery campuses in 13 countries. The company services over 250 clients across a range of industries such as Banking and Financial Services, Insurance, Technology, Telecom, Healthcare, Travel & Hospitality, Ecommerce, Consumer Goods, Retail, and Energy & Utilities. To learn more about Startek’s global solutions, please visit www.startek.com.

Forward-Looking Statements
The matters regarding the future discussed in this news release include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions. As described below, such statements are subject to a number of risks and uncertainties that could cause Startek's actual results to differ materially from those expressed or implied by any such forward-looking statements. Readers are encouraged to review risk factors and all other disclosures appearing in the Company's Form 10-K for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission (SEC) on March 12, 2020, as well as other filings with the SEC, for further information on risks and uncertainties that could affect Startek's business, financial condition and results of operation. Copies of these filings are available from the SEC, the Company’s website or the Company’s investor relations department. Startek assumes no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date herein.

Investor Relations
Sean Mansouri, CFA
Gateway Investor Relations
(949) 574-3860
investor@startek.com

For STARTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) please download this PDF version.

Source: Startek

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