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StarTek, Inc. Q1 2010 Earnings Call Transcript

Let me now jump into details starting on Page 4 which highlights our financial results for the first quarter. Revenues of $67 million represented nearly a 5% decline from the prior year and a 7% decline from last quarter. This sequential decline was driven primarily from site closures and lower demand in our telco clients. Margins declined dramatically during the quarter as a result of startup costs associated with the new offshore program launches, lower utilization in a number of our North American sites, and an unfavorable Canadian exchange rates.

In the fourth quarter, we initiated a number of cost reduction programs, both in the corporate and in the field level, reducing SG&A by approximately $600,000 for the quarter. Lower revenues and margins offset by favorable SG&A variance resulted in a quarterly loss of $3.1 million or $0.21. Cash at the end of the period was up to $27 million primarily due to a $5 million one-time tax refund.

On Page 5, we list some of the client highlights of the quarter. As mentioned earlier, the wireline sector continues to struggle as clients disconnect landlines. As a result, a number of our clients are reducing headcount, lowering future forecasts, and in some instances requesting price concessions. Revenue from our largest client AT&T for the quarter was relatively flat, with slight decreases in both the wireline and the wireless programs. Total AT&T revenues across three big business segments represented 67% of our revenue. In T-Mobile, our second largest client, revenue declined 20% sequentially due to a site closure in the first quarter and overall lower call volumes. We expect future demand in North America to be down offset by an increase in offshore.

Across-the-board, the migration from onshore to near-shore to offshore is accelerating, lowering North America demands and heightening demand for our Philippines and Costa Rica facilities, which by the year-end will represent over 3500 seats, or approximately 35% of our capacity.

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