2011 Financial Results

In 2011, revenue decreased 17.3% from $265 million in 2010 to $219 million. Gross margin grew slightly to 10.5% in 2011, compared to 10.4% in 2010. SG&A expense totaled $44.1 million in 2011, compared to $43.3 million in 2010. Excluding severance expense and legal fees related to the settlement of an employee labor relations lawsuit, SG&A expense would have been $39.9 million in 2011, compared to $42.1 million in 2010. Operating loss before impairment and restructuring charges was $21.1 million in 2011 and adjusted EBITDA was negative $3.8 million, compared to 2010 operating loss before impairment and restructuring of $15.6 million and 2010 adjusted EBITDA of $3.9 million. Net loss for the full year 2011 was $1.75 per share compared to a net loss of $1.30 per share in 2010.

Liquidity and Capital Resources

The Company ended 2011 with approximately $9.7 million in cash and cash equivalents and no debt, compared to $11.5 million and no debt at September 30, 2011. During the quarter, the Company implemented enhanced cash management practices to limit discretionary spending and monitor its capital expenditures, which management believes will help provide a foundation to return to positive adjusted EBITDA and working capital in 2012. The Company had $1.5 million and $9.0 million in capital expenditures during the quarter and year ending December 31, 2011, respectively.

2011 Operational Highlights

During the year, the Company:
  • Continued its sales momentum, signing eight new agreements with an expected annual contract value of nearly $29 million;
  • Experienced revenue growth of 17% in its client base, exclusive of its two largest customers, compared to 2010;
  • Expanded its international presence by opening a second Latin American facility with commitments from an existing client;
  • Continued growth in the Philippines, increasing the annual number of full-time equivalent agents to nearly 2,500, representing an increase of 86% over last year;
  • Reduced its North American footprint by closing its Alexandria, Louisiana site and one of its Kingston, Ontario sites as well as downsizing its Cornwall, Ontario and Collinsville, Virginia sites;
  • Reduced its revenue concentration from its largest customer from 66% in 2010 to 58% in 2011;
  • Made performance improvements among several clients and strengthened its operating and IT leadership teams to position the Company for future growth; and
  • Assembled a strong leadership team including the appointment of a new Chief Executive Officer, SVP of Sales & Marketing, Chief Technology Officer and Chief Financial Officer.

“Great strides were made during the year to lay the foundation for future growth by establishing the StarTek Operating Platform, making performance improvements with several of our clients, expanding our sales pipeline and securing new business, enhancing cash management practices and building a more effective leadership team,” said Chad Carlson, President and Chief Executive Officer. “These foundational elements will continue to enable and empower momentum through 2012, and we expect to exit the year in a stronger operating and financial position.”

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