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StarTek, Inc. Reports Third Quarter 2011 Results

For additional information on revenue, margin and operating metrics, please refer to the Financial Scorecard posted on the Investor Relations section of the Company’s website (investor.startek.com). Further details regarding the earnings call are described below.

Conference Call and Webcast Details

The Company will host a conference call today, October 27, 2011, at 9:00 a.m. MDT (11:00 a.m. EDT) to discuss its third quarter 2011 financial results. To participate in the teleconference, please call toll-free 866-314-4483 (or 617-213-8049 for international callers) and enter “75902827”. You may also listen to the teleconference live via the Company’s website at www.startek.com. For those that cannot access the live broadcast, a replay will be available on the Company’s website at www.startek.com.

About StarTek

StarTek, Inc. (NYSE: SRT) is a leading customer experience expert in the business process outsourcing industry. Our clients rely on us to ensure a great customer experience resulting in improved customer satisfaction and retention and an increase in revenue and cost efficiencies for our clients. StarTek has the platforms and the expertise to compete with the largest companies, but we remain small enough to focus on partnering with our clients to develop creative solutions that fit their unique needs. StarTek’s comprehensive suite of solutions includes sales, order management and provisioning, customer care, technical support, receivables management and retention programs. Our company also offers clients a variety of multi-channel customer interaction capabilities including voice, chat, email, IVR and back-office support. Headquartered in Denver, Colorado, StarTek has delivery centers onshore in North America, near shore in Costa Rica and Honduras, offshore in the Philippines and virtually through our StarTek@Home workforce. For more information, visit www.StarTek.com or call +1 303.262.4500.

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 two significant customers, consolidation by our clients, the concentration of our business in the telecommunications industry, pricing pressure, maximization of capacity utilization, lack of success of our clients’ products and services, consolidation of vendors by our clients, interruptions to the Company’s business due to geopolitical conditions and/or natural disasters, foreign currency exchange risk, lack of minimum purchase requirements in our contracts, ability to hire and retain qualified employees, the timely development of new products or services, failure to implement new technological advancements, increases in labor costs, lack of wide geographic diversity, continuing unfavorable economic conditions, our ability to effectively manage growth, increases in the cost of telephone and data services, unauthorized disclosure of confidential client or client customer information, risks inherent in the operation of business outside of North America, ability of our largest stockholder to affect decisions, stock price volatility, variation in quarterly operating results, inability to renew or replace sources of capital funding and, should we make acquisitions, the effective and timely integration of such acquisitions. 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, 2010, as well as Item 1A. – Risk Factors and all other disclosures in the Company’s subsequent Form 10-Qs, filed with the Securities and Exchange Commission, for further information on risks and uncertainties that could affect StarTek’s business, financial condition and results of operation.

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

 
      Three Months Ended September 30,       Nine Months Ended September 30,
  2011       2010     2011       2010  
Revenue $ 52,006 $ 65,598 $ 168,655 $ 200,684
Cost of services   47,946     58,964     150,905     179,279  
Gross profit 4,060 6,634 17,750 21,405
Selling, general and administrative expenses 9,981 10,327 32,857 31,485
Impairment losses and restructuring charges   291     450     3,563     1,214  
Operating loss (6,212 ) (4,143 ) (18,670 ) (11,294 )
Net interest and other income   5     29     11     243  
Loss before income taxes (6,207 ) (4,114 ) (18,659 ) (11,051 )
Income tax benefit (expense)   17     (368 )   263     (1,770 )
Net loss $ (6,190 ) $ (4,482 ) $ (18,396 ) $ (12,821 )
 
 
Net loss per share
Basic $ (0.41 ) $ (0.30 ) $ (1.22 ) $ (0.86 )
Diluted $ (0.41 ) $ (0.30 ) $ (1.22 ) $ (0.86 )
 
Weighted average shares outstanding
Basic 15,108 14,916 15,065 14,888
Diluted 15,108 14,916 15,065 14,888
 
 

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS & STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
        As of

September 30, 2011

     

December 31, 2010

ASSETS
Current assets:
Cash, cash equivalents and investments $ 11,516 $ 18,740
Trade accounts receivable 40,248 47,210
Other current assets   10,918   11,884
Total current assets 62,682 77,834
 
Property, plant and equipment, net 41,004 46,930
Other assets   7,294   7,991
Total assets $ 110,980 $ 132,755
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities $ 25,712 $ 27,665
Other liabilities   3,832   4,443
Total liabilities 29,544 32,108
 
Stockholders' equity   81,436   100,647
Total liabilities and stockholders' equity $ 110,980 $ 132,755
 
          Three Months Ended September 30,       Nine Months Ended September 30,
  2011       2010     2011       2010  
Operating Activities
Net loss $ (6,190 ) $ (4,482 ) $ (18,396 ) $ (12,821 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation 3,901 4,250 11,948 12,830
Impairment losses - 450 1,026 3,063
Non-cash compensation cost 324 561 1,194 1,585
Gain on foreign currency derivatives 166 255 1,464 1,138

Changes in operating assets & liabilities and other, net

  (3,624 )   1,194     3,422     9,812  
Net cash provided by operating activities   (5,423 )   2,228     658     15,607  
Investing Activities
Proceeds from investments available for sale, net - - - 606
Purchases of property, plant and equipment (3,239 ) (3,253 ) (7,417 ) (13,749 )
Proceeds from note receivable   165     110     495     110  
Net cash used in investing activities   (3,074 )   (3,143 )   (6,922 )   (13,033 )
Financing Activities
Other financing, net   12     53     140     146  
Net cash provided by financing activities 12 53 140 146
Effect of exchange rate changes on cash   (150 )   496     (1,100 )   (997 )
Net increase in cash and cash equivalents (8,635 ) (366 ) (7,224 ) 1,723

Cash and cash equivalents (not including investments) at beginning of period

20,151 21,680 18,740 19,591

 

       

Cash and cash equivalents (not including investments) at end of period

$ 11,516   $ 21,314   $ 11,516   $ 21,314  
 
 

STARTEK, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Dollars in thousands)

(Unaudited)

 

The information presented in this press release reports adjusted EBITDA, which the Company defines as net income (loss) plus income tax expense, interest income (expense), impairment and restructuring charges, depreciation expense, stock compensation expense and severance expense. The following tables provide reconciliations of these adjusted EBIDTA figures to net loss calculated in accordance with GAAP. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles in the United States (GAAP). It is provided solely to assist in an investor’s understanding of these items on the comparability of the Company’s operations. A reconciliation of the GAAP amounts to the non-GAAP amounts is shown below.

 

Adjusted EBITDA:

   
Three Months Ended
September 30, 2011         June 30, 2011
Net loss $ (6,190 ) $ (9,652 )
Income tax benefit (17 ) (525 )
Interest expense (income) 41 (20 )
Impairment losses and restructuring charges 291 3,272
Depreciation expense 3,901 4,061
Stock compensation expense 324 421
Severance expense   125     2,895  
Adjusted EBITDA $ (1,525 ) $ 452  




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