Business Wire | Nov 2, 2021 04:08PM EDT

Startek Reports Third Quarter 2021 Financial Results

Nov. 02, 2021

GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Nov. 02, 2021--Startek, Inc. (NYSE:SRT) ("Startek" or the "Company"), a global provider of customer experience management solutions, is reporting financial results for the third quarter ended September 30, 2021.

Third Quarter 2021 Financial Highlights($ in millions, excl. margin items)

Q3 2021 Q3 2020 Change

Net Revenue $ 172.8 $ 162.7 6 %

Gross Profit $ 21.5 $ 22.3 (3 )%

Gross Margin 12.5 % 13.7 % -120 bps

SG&A Expenses $ 13.1 $ 14.3 (8 )%

Net Income/(Loss)^[1] $ 0.1 $ 0.4 (79 )%

EPS^[1] $ 0.00 $ 0.01 (80 )%

Adjusted Net Income/(Loss)^[2]^, [3] $ 2.9 $ 3.3 (13 )%

Adjusted EPS^[2]^, [3] $ 0.07 $ 0.08 (14 )%

Adjusted EBITDA^[3] $ 15.9 $ 15.6 2 %

[1] Reflects net income (loss) attributable to Startek shareholders.

[2] Reflects Adjusted net income (loss) attributable to Startek shareholders.

[3] Refer to the note below about Non-GAAP financial measures.

Management Commentary

"During the third quarter, we continued to drive growth across core verticals and strengthen our operational foundation," said Aparup Sengupta, Executive Chairman and Global CEO of Startek. "We generated year-over-year increases across both revenue and adjusted EBITDA. While we maintained our disciplined approach to cost management across our organization, we experienced some gross margin pressure led by the cybersecurity event. Despite this, our work to invest in key platform enhancements, drive continued business development, and support our personnel across all geographies in which we operate has allowed us to continually improve our position as a nimble and innovative provider of differentiated customer experiences.

"Examining our performance by vertical, our growth during the third quarter was primarily driven by sustained momentum with our telecom clients, as well as continued strength within both banking & financial services and technology & IT services. By geography, we generated meaningful year-over-year improvements in India, the Middle East, and South Africa, with some year-over-year revenue softness in the United States due to growing pandemic-related labor constraints. As we continue to monitor these trends, we are placing a strong priority on ensuring we have a robust set of resources for delivering our high-quality business process management solutions. This includes increasing our sales, solutioning and marketing workforce, fine-tuning our go-to-market approach, and continuing to make investments in new digital capabilities for our platform. All of these investments are to strengthen our ability to preserve the quality and high-touch nature of our client services, no matter where or how we deploy them.

"Subsequent to the quarter, we further bolstered our senior management team with the announcement of two new executive appointments. Our new president, Bharat Rao, has been a Startek board member since 2018 and is a former Managing Partner at Capital Square Partners, and our new Global Chief Revenue Officer, Vivek Sharma, is Infosys BPM's former Senior Vice President for Global Sales. Both Bharat and Vivek have extensive experience with driving growth and innovation across new industry segments, and I look forward to working closely with them to accelerate our capabilities across the customer experience transformation journeys we offer.

"As we move into the fourth quarter, we remain focused on maintaining our momentum within our key geographies and verticals, as well as ensuring the continued efficiency of our global operations. We will continue working to execute on these objectives and maximize the value we create for our clients and shareholders."

Third Quarter 2021 Financial Results

Net revenue in the third quarter increased 6% to $172.8 million compared to $162.7 million in the year-ago quarter. The increase was driven by sustained strong performance across key verticals and geographies.

Gross profit in the third quarter was $21.5 million compared to $22.3 million in the year-ago quarter. Gross margin was 12.5% compared to 13.7% in the year-ago quarter. The decrease was primarily driven by higher growth in telecom, financial and business services and public sector enterprises verticals that are delivered onshore, as well as growing wage pressure and labor shortages in the United States.

Selling, general and administrative (SG&A) expenses in the third quarter decreased to $13.1 million compared to $14.3 million in the year-ago quarter. As a percentage of revenue, SG&A improved 120 basis points to 7.6% compared to 8.8% in the year-ago quarter as a result of continued operating leverage at the back of the higher revenue base generated during the quarter.

Net income attributable to Startek shareholders in the third quarter was $0.1 million or $0.00 per share, compared to a net income of $0.4 million or $0.01 per share in the year-ago quarter.

Adjusted net income* in the third quarter was $2.9 million or $0.07 per diluted share, compared to an adjusted net income* of $3.3 million or $0.08 per share in the year-ago quarter.

Adjusted EBITDA* in the third quarter increased slightly to $15.9 million compared to $15.6 million in the year-ago quarter. The increase was driven by the aforementioned growth in net revenue.

On September 30, 2021, cash and restricted cash were $63.5 million compared to $54.1 million[1] at June 30, 2021. The increase was primarily due to improved working capital during the third quarter. Total debt at September 30, 2021 decreased to $170.4 million compared to $173.9 million at June 30, 2021, and net debt at September 30, 2021 was $106.9 million[2] compared to $119.8 million at June 30, 2021.

During the three months ended September 30, 2021, the Company repurchased an aggregate of 57,759 shares of common stock under its repurchase plan, at an average cost of $5.67 per share.

*A non-GAAP measure defined below.

[1] Cash balance excluding restricted cash as at September 30, 2021 amounted to $56.8 million as compared to $47 million as at June 30, 2021. [2] Net debt excluding restricted cash balance at September 30, 2021 was $113.5 million compared to $126.9 million at June 30, 2021.

Conference Call and Webcast Details

Startek management will hold a conference call today at 5:00 p.m. Eastern time to discuss its financial results. The conference call will be followed by a question and answer period.

Date: Tuesday, November 2, 2021 Time: 5:00 p.m. Eastern time Toll-free dial-in number: (844) 239-5283 International dial-in number: (574) 990-1022 Conference ID: 3536546

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here, as well as in the investor relations section of the company's website at www.startek.com.

A telephonic replay of the conference call will also be available after 8:00 p.m. Eastern time on the same day through November 9, 2021.

Toll-free replay number: (855) 859-2056 International replay number: (404) 537-3406 Replay ID: 3536546

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 46,000 CX experts spread across 46 delivery campuses in 13 countries. The company services over 200 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, 2020, as filed with the Securities and Exchange Commission (SEC) on March 15, 2021, 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.

[1] Reflects net income (loss) attributable to Startek shareholders.

[2] Reflects Adjusted net income (loss) attributable to Startek shareholders.

[3] Refer to the note below about Non-GAAP financial measures.

Management Commentary

"During the third quarter, we continued to drive growth across core verticals and strengthen our operational foundation," said Aparup Sengupta, Executive Chairman and Global CEO of Startek. "We generated year-over-year increases across both revenue and adjusted EBITDA. While we maintained our disciplined approach to cost management across our organization, we experienced some gross margin pressure led by the cybersecurity event. Despite this, our work to invest in key platform enhancements, drive continued business development, and support our personnel across all geographies in which we operate has allowed us to continually improve our position as a nimble and innovative provider of differentiated customer experiences.

"Examining our performance by vertical, our growth during the third quarter was primarily driven by sustained momentum with our telecom clients, as well as continued strength within both banking & financial services and technology & IT services. By geography, we generated meaningful year-over-year improvements in India, the Middle East, and South Africa, with some year-over-year revenue softness in the United States due to growing pandemic-related labor constraints. As we continue to monitor these trends, we are placing a strong priority on ensuring we have a robust set of resources for delivering our high-quality business process management solutions. This includes increasing our sales, solutioning and marketing workforce, fine-tuning our go-to-market approach, and continuing to make investments in new digital capabilities for our platform. All of these investments are to strengthen our ability to preserve the quality and high-touch nature of our client services, no matter where or how we deploy them.

"Subsequent to the quarter, we further bolstered our senior management team with the announcement of two new executive appointments. Our new president, Bharat Rao, has been a Startek board member since 2018 and is a former Managing Partner at Capital Square Partners, and our new Global Chief Revenue Officer, Vivek Sharma, is Infosys BPM's former Senior Vice President for Global Sales. Both Bharat and Vivek have extensive experience with driving growth and innovation across new industry segments, and I look forward to working closely with them to accelerate our capabilities across the customer experience transformation journeys we offer.

"As we move into the fourth quarter, we remain focused on maintaining our momentum within our key geographies and verticals, as well as ensuring the continued efficiency of our global operations. We will continue working to execute on these objectives and maximize the value we create for our clients and shareholders."

Third Quarter 2021 Financial Results

Net revenue in the third quarter increased 6% to $172.8 million compared to $162.7 million in the year-ago quarter. The increase was driven by sustained strong performance across key verticals and geographies.

Gross profit in the third quarter was $21.5 million compared to $22.3 million in the year-ago quarter. Gross margin was 12.5% compared to 13.7% in the year-ago quarter. The decrease was primarily driven by higher growth in telecom, financial and business services and public sector enterprises verticals that are delivered onshore, as well as growing wage pressure and labor shortages in the United States.

Selling, general and administrative (SG&A) expenses in the third quarter decreased to $13.1 million compared to $14.3 million in the year-ago quarter. As a percentage of revenue, SG&A improved 120 basis points to 7.6% compared to 8.8% in the year-ago quarter as a result of continued operating leverage at the back of the higher revenue base generated during the quarter.

Net income attributable to Startek shareholders in the third quarter was $0.1 million or $0.00 per share, compared to a net income of $0.4 million or $0.01 per share in the year-ago quarter.

Adjusted net income* in the third quarter was $2.9 million or $0.07 per diluted share, compared to an adjusted net income* of $3.3 million or $0.08 per share in the year-ago quarter.

Adjusted EBITDA* in the third quarter increased slightly to $15.9 million compared to $15.6 million in the year-ago quarter. The increase was driven by the aforementioned growth in net revenue.

On September 30, 2021, cash and restricted cash were $63.5 million compared to $54.1 million[1] at June 30, 2021. The increase was primarily due to improved working capital during the third quarter. Total debt at September 30, 2021 decreased to $170.4 million compared to $173.9 million at June 30, 2021, and net debt at September 30, 2021 was $106.9 million[2] compared to $119.8 million at June 30, 2021.

During the three months ended September 30, 2021, the Company repurchased an aggregate of 57,759 shares of common stock under its repurchase plan, at an average cost of $5.67 per share.

*A non-GAAP measure defined below.

[1] Cash balance excluding restricted cash as at September 30, 2021 amounted to $56.8 million as compared to $47 million as at June 30, 2021. [2] Net debt excluding restricted cash balance at September 30, 2021 was $113.5 million compared to $126.9 million at June 30, 2021.

Conference Call and Webcast Details

Startek management will hold a conference call today at 5:00 p.m. Eastern time to discuss its financial results. The conference call will be followed by a question and answer period.

Date: Tuesday, November 2, 2021 Time: 5:00 p.m. Eastern time Toll-free dial-in number: (844) 239-5283 International dial-in number: (574) 990-1022 Conference ID: 3536546

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here, as well as in the investor relations section of the company's website at www.startek.com.

A telephonic replay of the conference call will also be available after 8:00 p.m. Eastern time on the same day through November 9, 2021.

Toll-free replay number: (855) 859-2056 International replay number: (404) 537-3406 Replay ID: 3536546

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 46,000 CX experts spread across 46 delivery campuses in 13 countries. The company services over 200 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, 2020, as filed with the Securities and Exchange Commission (SEC) on March 15, 2021, 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.

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Revenue 172,948 163,097 525,879 466,926

Warrant contra (161 ) (410 ) (991 ) (1,173 )revenue

Net revenue $ 172,787 $ 162,687 $ 524,888 $ 465,753

Cost of services (151,264 ) (140,392 ) (454,124 ) (408,747 )

Gross profit $ 21,523 $ 22,295 $ 70,764 $ 57,006



Selling, generaland administrative (13,099 ) (14,292 ) (39,568 ) (45,030 )expenses

Impairment lossesand restructuring/ (85 ) 12 (1,964 ) (24,545 )exit cost

Operating income/ $ 8,339 $ 8,015 $ 29,232 $ (12,569 )(loss)



Share of loss ofequity-accounted (46 ) (5 ) (1 ) (25 )investees

Interest expense, (2,236 ) (3,988 ) (18,489 ) (10,683 )net

Exchange gain / (533 ) (621 ) 42 (331 )(loss), net

Income/ (loss) $ 5,524 $ 3,401 $ 10,784 $ (23,609 )before income taxes

Income tax expense (2,402 ) (1,649 ) (9,397 ) (5,808 )

Net income/ (loss) $ 3,122 $ 1,752 $ 1,387 $ (29,417 )



Net income/ (loss)

Net incomeattributable to 3,046 1,385 6,581 1,990 non-controllinginterests

Net income/ (loss)attributable to 76 367 (5,194 ) (31,407 )Startekshareholders



Net income/ (loss)per common share - $ 0.00 $ 0.01 $ (0.13 ) $ (0.80 )basic

Net income/ (loss)per common share - $ 0.00 $ 0.01 $ (0.13 ) $ (0.80 )diluted



Weighted averagecommon shares 40,788 40,275 40,723 39,143 outstanding - basic

Weighted averagecommon shares 41,094 40,626 41,171 39,143 outstanding -diluted

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net income/ (loss)

$

3,122

$

1,752

$

1,387

$

(29,417

)

Net income attributable to non-controlling interests

3,046

1,385

6,581

1,990

Net income/ (loss) attributable to Startek shareholders

76

367

(5,194

)

(31,407

)

Other comprehensive income/ (loss), net of taxes:

Foreign currency translation adjustments

(179

)

936

(2,147

)

(2,729

)

Change in fair value of derivative instruments

-

103

8

(577

)

Pension amortization

(669

)

774

(1,090

)

(1,856

)

Other comprehensive income/ (loss)

$

(848

)

$

1,813

$

(3,229

)

$

(5,162

)

Other comprehensive income/ (loss), net of taxes

Other comprehensive income/ (loss) attributable to non-controlling interests

(374

)

413

(443

)

(1,211

)

Other comprehensive income/ (loss) attributable to Startek shareholders

(474

)

1,400

(2,786

)

(3,951

)

$

(848

)

$

1,813

$

(3,229

)

$

(5,162

)

Comprehensive income/ (loss)

Comprehensive income attributable to non-controlling interests

2,672

1,798

6,138

779

Comprehensive income/ (loss) attributable to Startek shareholders

(398

)

1,767

(7,980

)

(35,358

)

$

2,274

$

3,565

$

(1,842

)

$

(34,579

)

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Net income/ (loss) $ 3,122 $ 1,752 $ 1,387 $ (29,417 )

Net income attributable to 3,046 1,385 6,581 1,990 non-controlling interests

Net income/ (loss)attributable to Startek 76 367 (5,194 ) (31,407 )shareholders



Other comprehensive income/ (loss), net of taxes:

Foreign currency translation (179 ) 936 (2,147 ) (2,729 )adjustments

Change in fair value of - 103 8 (577 )derivative instruments

Pension amortization (669 ) 774 (1,090 ) (1,856 )

Other comprehensive income/ $ (848 ) $ 1,813 $ (3,229 ) $ (5,162 )(loss)



Other comprehensive income/ (loss), net of taxes

Other comprehensive income/(loss) attributable to (374 ) 413 (443 ) (1,211 )non-controlling interests

Other comprehensive income/(loss) attributable to (474 ) 1,400 (2,786 ) (3,951 )Startek shareholders

$ (848 ) $ 1,813 $ (3,229 ) $ (5,162 )

Comprehensive income/ (loss)

Comprehensive incomeattributable to 2,672 1,798 6,138 779 non-controlling interests

Comprehensive income/ (loss)attributable to Startek (398 ) 1,767 (7,980 ) (35,358 )shareholders

$ 2,274 $ 3,565 $ (1,842 ) $ (34,579 )

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

September 30,

December 31,

2021

2020

Assets

Current assets

Cash and cash equivalents

56,840

44,507

Restricted cash

6,634

6,052

Trade accounts receivables, net

68,504

83,560

Unbilled revenue

62,066

49,779

Prepaid and other current assets

13,928

14,542

Total current assets

$

207,972

$

198,440

Non-current assets

Property, plant and equipment, net

35,228

34,225

Operating lease right-of-use assets

56,775

69,376

Intangible assets, net

92,695

100,440

Goodwill

183,397

183,397

Investment in equity-accounted investees

25,006

111

Deferred tax assets, net

3,273

5,294

Prepaid expenses and other non-current assets

15,482

13,370

Total non-current assets

$

411,856

$

406,213

Total assets

619,828

$

604,653

Liabilities and Shareholders' Equity

Current liabilities

Trade accounts payables

6,351

20,074

Accrued expenses

57,193

57,118

Short term debt

3,929

15,505

Current maturity of long term debt

2,217

2,180

Current maturity of operating lease obligation

17,825

19,327

Other current liabilities

43,801

39,987

Total current liabilities

$

131,316

$

154,191

Non-current liabilities

Long term debt

164,240

118,315

Operating lease liabilities

41,176

52,052

Other non-current liabilities

17,412

15,498

Deferred tax liabilities, net

17,616

17,715

Total non-current liabilities

$

240,444

$

203,580

Total liabilities

$

371,760

$

357,771

Stockholders' equity:

Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 40,859,738 and 40,453,462 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

409

405

Additional paid-in capital

292,053

288,700

Accumulated deficit

(90,737

)

(85,543

)

Treasury stock, 57,759 and nil shares at September 30, 2021 and December 31, 2020, respectively, at cost

(329

)

-

Accumulated other comprehensive loss

(10,072

)

(7,286

)

Equity attributable to Startek shareholders

$

191,324

$

196,276

Non-controlling interests

56,744

50,606

Total stockholders' equity

$

248,068

$

246,882

Total liabilities and stockholders' equity

$

619,828

$

604,653

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

September December 30, 31,

2021 2020

Assets

Current assets

Cash and cash equivalents 56,840 44,507

Restricted cash 6,634 6,052

Trade accounts receivables, net 68,504 83,560

Unbilled revenue 62,066 49,779

Prepaid and other current assets 13,928 14,542

Total current assets $ 207,972 $ 198,440



Non-current assets

Property, plant and equipment, net 35,228 34,225

Operating lease right-of-use assets 56,775 69,376

Intangible assets, net 92,695 100,440

Goodwill 183,397 183,397

Investment in equity-accounted investees 25,006 111

Deferred tax assets, net 3,273 5,294

Prepaid expenses and other non-current assets 15,482 13,370

Total non-current assets $ 411,856 $ 406,213

Total assets 619,828 $ 604,653



Liabilities and Shareholders' Equity

Current liabilities

Trade accounts payables 6,351 20,074

Accrued expenses 57,193 57,118

Short term debt 3,929 15,505

Current maturity of long term debt 2,217 2,180

Current maturity of operating lease obligation 17,825 19,327

Other current liabilities 43,801 39,987

Total current liabilities $ 131,316 $ 154,191



Non-current liabilities

Long term debt 164,240 118,315

Operating lease liabilities 41,176 52,052

Other non-current liabilities 17,412 15,498

Deferred tax liabilities, net 17,616 17,715

Total non-current liabilities $ 240,444 $ 203,580

Total liabilities $ 371,760 $ 357,771



Stockholders' equity:

Common stock, 60,000,000 non-convertible shares,$0.01 par value, authorized; 40,859,738 and40,453,462 shares issued and outstanding at 409 405 September 30, 2021 and December 31, 2020,respectively

Additional paid-in capital 292,053 288,700

Accumulated deficit (90,737 ) (85,543 )

Treasury stock, 57,759 and nil shares at September30, 2021 and December 31, 2020, respectively, at (329 ) - cost

Accumulated other comprehensive loss (10,072 ) (7,286 )

Equity attributable to Startek shareholders $ 191,324 $ 196,276

Non-controlling interests 56,744 50,606

Total stockholders' equity $ 248,068 $ 246,882

Total liabilities and stockholders' equity $ 619,828 $ 604,653

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended September 30,

2021

2020

Operating Activities

Net loss

$

1,387

$

(29,417

)

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

Depreciation and amortization

20,398

21,279

Impairment of goodwill

-

22,708

Profit on sale of property, plant and equipment

(37

)

181

Provision for doubtful accounts

23

2,089

Amortisation of debt issuance cost

2,980

1,148

Amortisation of call option premium

360

-

Warrant contra revenue

991

1,173

Share-based compensation expense

932

447

Deferred income taxes

1,838

1,192

Share of loss of equity-accounted investees

1

25

Changes in operating assets and liabilities:

Trade accounts receivables

13,120

26,171

Prepaid expenses and other assets

(11,968

)

(117

)

Trade accounts payables

(13,409

)

(10,155

)

Income taxes, net

(602

)

1,300

Accrued expenses and other liabilities

6,543

27,421

Net cash generated from operating activities

$

22,557

$

65,445

Investing Activities

Purchase of property, plant and equipment

(13,358

)

(10,141

)

Investment in equity-accounted investees

(25,000

)

-

Payments for call option premium

(3,000

)

-

Proceeds from equity-accounted investees

102

429

Net cash used in investing activities

$

(41,256

)

$

(9,712

)

Financing Activities

Proceeds from the issuance of common stock

1,434

8,379

Proceeds from long term debt

165,000

-

Payments on long term debt

(117,600

)

(4,200

)

Payments for loan fees related to long term debt

(2,794

)

-

Payments on other debt, net

(13,145

)

(35,697

)

Common stock repurchase

(329

)

0

Net cash generated from/ (used in) financing activities

$

32,566

$

(31,518

)

Net increase in cash and cash equivalents

13,867

24,215

Effect of exchange rate changes on cash and cash equivalents and restricted cash

(952

)

(256

)

Cash and cash equivalents and restricted cash at beginning of period

50,559

32,626

Cash and cash equivalents and restricted cash at end of period

$

63,474

$

56,585

Components of cash and cash equivalents and restricted cash

Balance with banks

56,840

48,463

Restricted cash

6,634

8,122

Total cash and cash equivalents and restricted cash

$

63,474

$

56,585

Supplemental disclosure of cash flow information

Cash paid for interest and other finance costs

19,985

10,392

Cash paid for income taxes

7,884

2,752

Non-cash warrant contra revenue

991

1,173

Non-cash share-based compensation expenses

932

447

STARTEK, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURE(In thousands) (Unaudited)

This press release contains references to the non-GAAP financial measure of Adjusted EBITDA. Reconciliation of this non-GAAP measure to its comparable GAAP measure is 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.

Adjusted EBITDA:

The Company defines non-GAAP Adjusted EBITDA as Net loss plus Income tax expense, Interest and other expense, net, Exchange gain / (loss), net, Depreciation and amortization expense, Restructuring and other acquisition-related costs, Share-based compensation expense, and Warrant contra revenue (if applicable). Management uses Adjusted EBITDA as a performance measure to analyze the performance of our business. Management believes that excluding these non-cash and other non-recurring items permits a more meaningful comparison and understanding of the strength and performance of our ongoing operations for our investors and analysts.

Adjusted EPS:

Adjusted EPS is a non-GAAP financial measure presenting the earnings generated by the ongoing operations that we believe are useful to investors in making meaningful comparisons to other companies, although our measure of Adjusted EPS may not be directly comparable to similar measures used by other companies, and period-over-period comparisons. Adjusted EPS is defined as our diluted earnings per common share attributable to StarTek shareholders adjusted to exclude the effects of the amortization of acquisition-related intangible assets, investments that investors may want to evaluate separately (such as based on fair value), and the impact of certain events, gains, losses or other charges that affect period-over-period comparisons. Acquisition-related intangible assets are recognized as a result of the application of Accounting Standards Codification Topic ("ASC") 805, Business Combinations (such as customer relationships and Brand), and their amortization is significantly affected by the size and timing of our acquisitions.

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended September 30,

2021 2020

Operating Activities

Net loss $ 1,387 $ (29,417 )



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

Depreciation and amortization 20,398 21,279

Impairment of goodwill - 22,708

Profit on sale of property, plant and equipment (37 ) 181

Provision for doubtful accounts 23 2,089

Amortisation of debt issuance cost 2,980 1,148

Amortisation of call option premium 360 -

Warrant contra revenue 991 1,173

Share-based compensation expense 932 447

Deferred income taxes 1,838 1,192

Share of loss of equity-accounted investees 1 25



Changes in operating assets and liabilities:

Trade accounts receivables 13,120 26,171

Prepaid expenses and other assets (11,968 ) (117 )

Trade accounts payables (13,409 ) (10,155 )

Income taxes, net (602 ) 1,300

Accrued expenses and other liabilities 6,543 27,421

Net cash generated from operating activities $ 22,557 $ 65,445



Investing Activities

Purchase of property, plant and equipment (13,358 ) (10,141 )

Investment in equity-accounted investees (25,000 ) -

Payments for call option premium (3,000 ) -

Proceeds from equity-accounted investees 102 429

Net cash used in investing activities $ (41,256 ) $ (9,712 )



Financing Activities

Proceeds from the issuance of common stock 1,434 8,379

Proceeds from long term debt 165,000 -

Payments on long term debt (117,600 ) (4,200 )

Payments for loan fees related to long term debt (2,794 ) -

Payments on other debt, net (13,145 ) (35,697 )

Common stock repurchase (329 ) 0

Net cash generated from/ (used in) financing $ 32,566 $ (31,518 )activities



Net increase in cash and cash equivalents 13,867 24,215

Effect of exchange rate changes on cash and cash (952 ) (256 )equivalents and restricted cash

Cash and cash equivalents and restricted cash at 50,559 32,626 beginning of period

Cash and cash equivalents and restricted cash at end $ 63,474 $ 56,585 of period



Components of cash and cash equivalents and restricted cash

Balance with banks 56,840 48,463

Restricted cash 6,634 8,122

Total cash and cash equivalents and restricted cash $ 63,474 $ 56,585



Supplemental disclosure of cash flow information

Cash paid for interest and other finance costs 19,985 10,392

Cash paid for income taxes 7,884 2,752

Non-cash warrant contra revenue 991 1,173

Non-cash share-based compensation expenses 932 447

STARTEK, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURE(In thousands) (Unaudited)

This press release contains references to the non-GAAP financial measure of Adjusted EBITDA. Reconciliation of this non-GAAP measure to its comparable GAAP measure is 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.

Adjusted EBITDA:

The Company defines non-GAAP Adjusted EBITDA as Net loss plus Income tax expense, Interest and other expense, net, Exchange gain / (loss), net, Depreciation and amortization expense, Restructuring and other acquisition-related costs, Share-based compensation expense, and Warrant contra revenue (if applicable). Management uses Adjusted EBITDA as a performance measure to analyze the performance of our business. Management believes that excluding these non-cash and other non-recurring items permits a more meaningful comparison and understanding of the strength and performance of our ongoing operations for our investors and analysts.

Adjusted EPS:

Adjusted EPS is a non-GAAP financial measure presenting the earnings generated by the ongoing operations that we believe are useful to investors in making meaningful comparisons to other companies, although our measure of Adjusted EPS may not be directly comparable to similar measures used by other companies, and period-over-period comparisons. Adjusted EPS is defined as our diluted earnings per common share attributable to StarTek shareholders adjusted to exclude the effects of the amortization of acquisition-related intangible assets, investments that investors may want to evaluate separately (such as based on fair value), and the impact of certain events, gains, losses or other charges that affect period-over-period comparisons. Acquisition-related intangible assets are recognized as a result of the application of Accounting Standards Codification Topic ("ASC") 805, Business Combinations (such as customer relationships and Brand), and their amortization is significantly affected by the size and timing of our acquisitions.

Adjusted EBITDA:

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Net Profit/(Loss) 3,122 1,752 1,387 (29,417 )

Income tax expense 2,402 1,649 9,397 5,808

Interest and other expense, net 2,282 3,993 18,490 10,708

Exchange gain/(loss), net 533 621 (42 ) 331

Depreciation and amortization 6,927 6,951 20,398 21,279 expense

Impairment losses and 85 (12 ) 1,964 24,545 restructuring cost

Share-based compensation 341 238 932 447 expense

Warrant contra revenue 161 410 991 1,173

Adjusted EBITDA $ 15,853 $ 15,602 $ 53,517 $ 34,874

Adjusted EPS:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Profit attributable to Startek shareholders

76

367

(5,194

)

(31,407

)

Add: Share based compensation expense

341

238

932

447

Add: Amortization of intangible assets, net of tax

2,279

2,279

6,785

6,801

Add: Warrant contra revenue

161

410

991

1,173

Add: Goodwill impairment loss

-

-

-

22,708

Add: Debt issuance cost

-

-

10,937

-

Adjusted net income / (loss) (non-GAAP)

$

2,856

$

3,294

$

14,451

$

(277

)

Weighted average common shares outstanding - basic

40,788

40,275

40,723

39,143

Weighted average common shares outstanding - diluted

41,094

40,626

41,171

39,143

Adjusted EPS - basic

$

0.07

$

0.08

$

0.35

$

(0.01

)

Adjusted EPS - diluted

$

0.07

$

0.08

$

0.35

$

(0.01

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20211102006056/en/

CONTACT: Investor Relations

CONTACT: Giuseppe Montefinese Startek, Inc. +1 732-890-8929 giuseppe.montefinese@startek.com

CONTACT: Cody Cree or Jackie Keshner Gateway Investor Relations +1 949-574-3860 SRT@gatewayir.com