16.7% Year over Year Revenue Growth
StarTek, Inc. ("STARTEK") (NYSE:SRT) today announced its fourth
quarter and full year 2013 financial results.
2013 Highlights
- Strong sales of new programs with
existing and new clients with $64.0 million of expected contract
value;
- Expanded 1,500 new seats in 2013 with
commitments for an additional 2,500 across all segments;
- Diversified and differentiated
portfolio with the acquisitions of Ideal Dialogue and RN's On
Call;
- Sold a portion of real estate holdings,
providing cash to support growth objectives; and
- Reduced SG&A expense to 12.5% of
revenue.
Fourth Quarter 2013 Financial Results
Fourth quarter 2013 revenue increased 15.0% compared to the
fourth quarter of 2012, a reflection of continued growth with
existing clients and new business. All geographic segments
experienced sequential revenue growth during the fourth quarter.
Excluding non-recurring IT transformation costs, the Company
generated operating income of $0.4 million in the fourth quarter of
2013. Including the above charges, the Company reported an
operating loss of $0.3 million during the fourth quarter of 2013 as
compared to operating income of $1.2 million in the fourth quarter
of 2012.
Gross margin decreased to 11.8% as compared to 15.0% in the
fourth quarter of 2012. Strong margin performance in the Domestic
and Latin America segments did not offset the performance and ramp
related impact in the Asia Pacific segment. Fourth quarter 2013
margins were also impacted by investments in facility expansions
and IT transformation costs.
SG&A expense was 11.4% of revenue in the fourth quarter of
2013 as compared to 12.8% same quarter last year. The Company
recorded an impairment of $0.5 million for the Costa Rica facility
as the historical and future cash flows did not support the
carrying value of the assets.
Fourth quarter 2013 Adjusted EBITDA of $3.6 million compares to
a fourth quarter 2012 Adjusted EBITDA of $4.5 million. As expected,
growth-related and IT transformation costs negatively impacted
current quarter results.
2013 Financial Results
In 2013, revenue increased 16.7% to $231.3 million from $198.1
million in 2012. Gross margin declined to 10.5% in 2013 from 11.6%
in 2012 as the Company invested in new capacity and initiatives.
Latin America margins improved to 3.6% in 2013 from (4.7%) in 2012
as a result of capacity utilization improvements and the Domestic
segment margin performance remained strong throughout the year.
SG&A expense as a percentage of revenue declined to 12.5% in
2013 as compared to 15.0% in 2012.
Excluding non-recurring IT transformation costs and unusual
facility costs, the Company generated a net loss of $4.0 million,
or $0.26 per share. Including the above charges, the Company
reported a net loss of $6.4 million, or $0.42 per share, in 2013 as
compared to a net loss of $10.5 million, or $0.69 per share, in
2012.
Liquidity and Capital Resources
As of December 31, 2013, the Company's cash position was $11.0
million, the result of the sale of the Greeley, Colorado properties
and ongoing cash management practices. This balance compares to
$9.2 million as of December 31, 2012. The Company reported a $1.0
million balance on its line of credit as of December 31, 2013 and
had approximately $4.8 million and $8.8 million in capital
expenditures during the fourth quarter and year ended December 31,
2013, respectively.
"We are pleased with the rate of growth in 2013," said Chad
Carlson, President and Chief Executive Officer. "And we are proud
of the continued progress and accomplishments of key strategic
initiatives.”
For additional information on revenue and margin, please refer
to the Financial Scorecard attached as Exhibit 99.2 to the Current
Report on Form 8-K, which includes this press release.
Conference Call and Webcast Details
The Company will host a conference call today, February 24,
2014, at 3:00 p.m. MST (5:00 p.m. EST) to discuss fourth quarter
and full year 2013 financial results. To participate in the
teleconference, please call toll-free 866 515.2910 (or 617 399.5124
for international callers) and enter “78490489”. 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 is a comprehensive contact center and business process
outsourcing service company with employees we call Brand Warriors
who for over 25 years have been committed to making a positive
impact on our clients’ business results. Our mission is to enable
and empower our Brand Warriors to promote our clients’ brands every
day and bring value to our stakeholders. We accomplish this by
aligning with our clients’ business objectives. For more
information, go to www.startek.com or call +1303.262.4500.
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 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, 2012 and Item 1A. - Risk Factors appearing in the
Company's Form 10-Q for the quarter ended September 30, 2013 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 operations.
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months EndedDecember 31, Twelve
Months EndedDecember 31, 2013
2012 2013 2012 Revenue $ 63,422
$ 55,137 $ 231,257 $ 198,092 Cost of services 55,967 46,849
206,932 175,095 Gross profit 7,455 8,288
24,325 22,997 Selling, general and administrative expenses 7,227
7,067 28,828 29,645 Impairment losses and restructuring charges,
net 531 (20 ) 94 4,066 Operating income (loss)
(303 ) 1,241 (4,597 ) (10,714 ) Interest and other (income)
expense, net 570 (47 ) 1,579 (342 ) Income (loss)
before income taxes (873 ) 1,288 (6,176 ) (10,372 ) Income tax
expense 143 137 230 116 Net income
(loss) $ (1,016 ) $ 1,151 $ (6,406 ) $ (10,488 ) Net
income (loss) per common share - basic (0.07 ) 0.08 (0.42 ) (0.69 )
Net income (loss) per common share - diluted (0.07 ) 0.07 (0.42 )
(0.69 ) Weighted average shares outstanding - basic 15,365
15,273 15,339 15,241 Weighted average shares outstanding - diluted
15,365 15,491 15,339 15,241
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
As of
December 31,2013
December 31,2012
ASSETS Current assets: Cash and cash equivalents $ 10,989 $
9,183 Trade accounts receivable, net 43,708 41,070 Other current
assets 5,367 10,027 Total current assets 60,064 60,280
Property, plant and equipment, net 22,210 26,310 Other assets 7,443
6,542 Total assets $ 89,717 $ 93,132
LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities 28,498 23,879
Other liabilities 3,045 2,974 Total liabilities 31,543
26,853 Total stockholders’ equity 58,174 66,279 Total
liabilities and stockholders' equity $ 89,717 $ 93,132
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2013 2012 2013
2012 Net income (loss) $ (1,016 ) $ 1,151 $ (6,406 ) $
(10,488 ) Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities: Depreciation and
amortization 2,943 2,949 12,527 12,957 Impairment losses 531 — 531
3,086 Losses (gains) on disposal of assets 204 — 1,074 (45 ) Loss
on sale leaseback transaction 475 — 475 — Non-cash compensation
cost 352 279 1,607 1,275 Amortization of deferred gain on sale
leaseback transaction (67 ) (47 ) (273 ) (47 ) Changes in operating
assets & liabilities and other, net 728 (5,744 ) (3,293
) (3,827 ) Net cash provided by (used in) operating activities
4,150 (1,412 ) 6,242 2,911
Investing
Activities Purchases of property, plant and equipment (4,789 )
(2,625 ) (8,843 ) (7,305 ) Proceeds from sale of assets 3,394 —
3,394 — Proceeds from sale leaseback transaction 1,337 3,884 1,337
3,884 Proceeds from note receivable 162 165 658 660 Cash paid for
acquisitions of businesses (208 ) — (2,097 ) — Net
cash (used in) provided by investing activities (104 ) 1,424
(5,551 ) (2,761 )
Financing Activities Other financing, net
1,009 3 1,213 7 Net cash provided by
financing activities 1,009 3 1,213 7 Effect of exchange rate
changes on cash (83 ) (31 ) (98 ) (693 ) Net increase (decrease) in
cash and cash equivalents 4,972 (16 ) 1,806 (536 ) Cash and cash
equivalents at beginning of period $ 6,017 $ 9,199 $
9,183 $ 9,719 Cash and cash equivalents at end of
period $ 10,989 $ 9,183 $ 10,989 $ 9,183
STARTEK, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP
MEASURES(In thousands)(Unaudited)
The information presented in this press release or on the
conference call may report 1) Adjusted EBITDA, 2) operating
(income) loss before impairment losses and restructuring charges
and 3) gross profit, operating income (loss) and net (income) loss
adjusted for certain non-recurring items. Reconciliations of these
non-GAAP measures to their comparable GAAP measures are included
below. This non-GAAP information should not be construed as an
alternative to the reported results determined in accordance with
GAAP. It is provided solely to assist in an investor’s
understanding of these items on the comparability of the Company’s
operations.
Beginning in the third quarter of 2013, STARTEK changed its
definition of non-GAAP Adjusted EBITDA to be calculated as net
income (loss) plus income tax expense (benefit), interest expense
(income), impairment losses and restructuring charges, depreciation
and amortization expense, (gains) losses on disposal of assets and
stock compensation expense. Management uses Adjusted EBITDA as a
performance measure to analyze the performance of our business. The
change was made in an attempt to clarify for investors our
recurring earnings from operations while excluding non-cash items,
which are not a result of our core business. This helps investors
and analysts assess the strength and performance of our ongoing
operations. The change has been applied retroactively to all
periods presented.
Management believes that the measures that exclude impairment
losses and restructuring charges or other non-recurring items
permit a more meaningful comparison and understanding of our
operating performance for the current, past or future periods.
Adjusted EBITDA:
Three Months Ended Twelve
Months Ended
December 31,2013
December 31,2012
December 31,2013
December 31,2012
Net income (loss) $ (1,016 ) $ 1,151 $ (6,406 ) $ (10,488 )
Income tax expense 143 137 230 116 Interest expense (income) 4 7 26
(8 ) Impairment losses and restructuring charges, net 531 (20 ) 94
4,066 Depreciation and amortization expense 2,943 2,949 12,527
12,957 (Gains) losses on disposal of assets 679 10 1,549 (45 )
Stock compensation expense 352 279 1,607 1,275
Adjusted EBITDA $ 3,636 $ 4,513 $ 9,627
$ 7,873
Operating Income (Loss) before
Impairment and Restructuring Charges:
Three Months Ended Twelve
Months Ended
December 31,2013
December 31,2012
December 31,2013
December 31,2012
Operating income (loss) $ (303 ) $ 1,241 $ (4,597 ) $
(10,714 ) Impairment losses & restructuring charges 531
(20 ) 94 4,066
Operating income (loss) before impairment
and restructuring charges
$ 228 $ 1,221 $ (4,503 ) $ (6,648 )
Operating Results
Excluding IT Transformation Costs and Unusual Facility
Costs:
Three Months Ended December 31, 2013
ReportedResults
ITTransformationCosts
Operatingresults, net of
ITTransformationCosts
UnusualFacility Costs
Operating results,net of
ITTransformationand UnusualFacility
Costs
Gross profit $ 7,455 723 $ 8,178 — $ 8,178 Operating income (loss)
$ (303 ) 723 $ 420 — $ 420 Net income (loss) $ (1,016 ) 770 $ (246
) — $ (246 ) Net income (loss) per share $ (0.07 ) $ (0.02 ) $
(0.02 )
Operating Results
Excluding IT Transformation Costs and Unusual Facility
Costs:
Twelve Months Ended December 31, 2013
ReportedResults
ITTransformationCosts
Operatingresults, net
ofIT TransformationCosts
UnusualFacilityCosts
Operating results,net of
ITTransformationand UnusualFacility
Costs
Gross profit $ 24,325 1,472 $ 25,797 422 $ 26,219 Operating income
(loss) $ (4,597 ) 1,472 $ (3,125 ) (15 ) $ (3,140 ) Net income
(loss) $ (6,406 ) 2,438 $ (3,968 ) (15 ) $ (3,983 ) Net income
(loss) per share $ (0.42 ) $ (0.26 ) $ (0.26 )
StarTek, Inc.Rosemary Hanratty, 303-262-4144Director of
Marketing & CommunicationsRosemary.Hanratty@startek.com
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