DELAWARE | 1-12793 | 84-1370538 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
£ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
£ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
£ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
£ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit Number | Exhibit Description |
STARTEK, INC. | ||
August 7, 2018 | By: | /s/ Don Norsworthy |
Don Norsworthy Senior Vice President, Chief Financial Officer and Treasurer |
• | Total revenue was $59.7 million compared to $74.0 million. |
• | Gross profit was $5.2 million compared to $9.0 million, with gross margin of 8.8% compared to 12.1%. |
• | Net loss was $3.7 million or $(0.23) per share, compared to net income of $0.6 million or $0.03 per share. |
• | Adjusted EBITDA* was $0.7 million compared to $4.4 million. |
• | On July 20, 2018, Startek completed its strategic combination with Capital Square Partners (CSP) portfolio company, Aegis, to create a global BPO platform with differentiation, scale and a diverse customer base |
• | Combined 2017 revenue of approximately $700 million and adjusted EBITDA of approximately $50 million |
• | Top three customers now represent less than 30% of total revenue compared to 53% for Startek in 2017. |
• | Synergies expected to drive incremental $30 million in EBITDA by 2020 through enhanced revenue growth and cost savings. |
• | Startek shareholders own approximately 45% of the combined company, while CSP owns approximately 55%. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue | $ | 59,717 | $ | 73,979 | $ | 128,831 | $ | 151,631 | ||||||||
Warrant contra revenue | — | — | (2,500 | ) | — | |||||||||||
Net revenue | 59,717 | 73,979 | 126,331 | 151,631 | ||||||||||||
Cost of services | 54,491 | 64,992 | 115,646 | 132,630 | ||||||||||||
Gross profit | 5,226 | 8,987 | 10,685 | 19,001 | ||||||||||||
Selling, general and administrative expenses | 6,990 | 8,171 | 15,549 | 16,053 | ||||||||||||
Transaction related fees | 1,020 | — | 2,907 | — | ||||||||||||
Impairment losses and restructuring charges, net | 512 | 412 | 4,965 | 412 | ||||||||||||
Operating income (loss) | (3,296 | ) | 404 | (12,736 | ) | 2,536 | ||||||||||
Interest and other expense, net | (392 | ) | 84 | (830 | ) | (283 | ) | |||||||||
Income (loss) before income taxes | (3,688 | ) | 488 | (13,566 | ) | 2,253 | ||||||||||
Income tax expense (benefit) | 17 | (66 | ) | 165 | (94 | ) | ||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Net income (loss) per common share - basic | $ | (0.23 | ) | $ | 0.03 | $ | (0.85 | ) | $ | 0.15 | ||||||
Weighted average common shares outstanding - basic | 16,214 | 15,916 | 16,204 | 15,866 | ||||||||||||
Net income (loss) per common share - diluted | $ | (0.23 | ) | $ | 0.03 | $ | (0.85 | ) | $ | 0.14 | ||||||
Weighted average common shares outstanding - diluted | 16,214 | 17,247 | 16,204 | 17,127 |
June 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,336 | $ | 1,456 | ||||
Trade accounts receivable, net | 51,812 | 53,052 | ||||||
Other current assets | 3,394 | 3,641 | ||||||
Total current assets | 56,542 | 58,149 | ||||||
Property, plant and equipment, net | 16,265 | 19,943 | ||||||
Other long-term assets | 15,273 | 17,906 | ||||||
Total assets | $ | 88,080 | $ | 95,998 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | $ | 22,622 | $ | 25,948 | ||||
Other liabilities | 30,209 | 23,111 | ||||||
Total liabilities | 52,831 | 49,059 | ||||||
Total stockholders’ equity | 35,249 | 46,939 | ||||||
Total liabilities and stockholders’ equity | $ | 88,080 | $ | 95,998 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating Activities | ||||||||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 2,293 | 2,771 | 4,936 | 5,733 | ||||||||||||
Share-based compensation expense | 224 | 301 | 487 | 530 | ||||||||||||
Warrant contra revenue | $ | — | — | $ | 2,500 | — | ||||||||||
Changes in operating assets & liabilities and other, net | (18 | ) | 375 | 984 | 2,574 | |||||||||||
Net cash (used in) provided by operating activities | $ | (1,206 | ) | $ | 4,001 | $ | (4,824 | ) | $ | 11,184 | ||||||
Investing Activities | ||||||||||||||||
Purchases of property, plant and equipment | (1,030 | ) | (941 | ) | (2,972 | ) | (2,054 | ) | ||||||||
Proceeds from sale of assets | — | — | — | 342 | ||||||||||||
Net cash used in investing activities | $ | (1,030 | ) | $ | (941 | ) | $ | (2,972 | ) | $ | (1,712 | ) | ||||
Financing Activities | ||||||||||||||||
Other financing, net | 2,350 | (2,549 | ) | 7,449 | (8,624 | ) | ||||||||||
Net cash provided by (used in) financing activities | $ | 2,350 | $ | (2,549 | ) | $ | 7,449 | $ | (8,624 | ) | ||||||
Effect of exchange rate changes on cash | 26 | 14 | 227 | 2 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 140 | 525 | (120 | ) | 850 | |||||||||||
Cash and cash equivalents at beginning of period | $ | 1,196 | $ | 1,364 | $ | 1,456 | $ | 1,039 | ||||||||
Cash and cash equivalents at end of period | $ | 1,336 | $ | 1,889 | $ | 1,336 | $ | 1,889 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Income tax expense (benefit) | 17 | (66 | ) | 165 | (94 | ) | ||||||||||
Impairment losses and restructuring charges, net | 512 | 412 | 4,965 | 412 | ||||||||||||
Interest expense | 391 | 414 | 782 | 832 | ||||||||||||
Depreciation and amortization expense | 2,293 | 2,771 | 4,936 | 5,733 | ||||||||||||
Gain on sale of assets | (29 | ) | — | (29 | ) | — | ||||||||||
Share-based compensation expense | 224 | 301 | 487 | 530 | ||||||||||||
Transaction related fees | 1,020 | — | 2,907 | — | ||||||||||||
Warrant contra revenue | — | — | 2,500 | — | ||||||||||||
Adjusted EBITDA | $ | 723 | $ | 4,386 | $ | 2,982 | $ | 9,760 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Gross profit | 5,226 | 8,987 | 10,685 | 19,001 | ||||||||||||
Warrant contra revenue | — | — | (2,500 | ) | — | |||||||||||
Adjusted gross profit | $ | 5,226 | $ | 8,987 | $ | 8,185 | $ | 19,001 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) | $ | (3,705 | ) | $ | 554 | $ | (13,731 | ) | $ | 2,347 | ||||||
Warrant contra revenue | — | — | (2,500 | ) | — | |||||||||||
Impairment losses and restructuring charges, net | 512 | 412 | 4,965 | 412 | ||||||||||||
Transaction related fees | 1,020 | — | 2,907 | — | ||||||||||||
Adjusted net income (loss) | $ | (2,173 | ) | $ | 966 | $ | (8,359 | ) | $ | 2,759 |
Operating Results Scorecard | ||||||||||||||||||||||||||
As of June 30, 2018 | ||||||||||||||||||||||||||
Q1-17 | Q2-17 | Q3-17 | Q4-17 | 2017 | Q1-18 | Q2-18 | 2018 | |||||||||||||||||||
Revenue (millions) | ||||||||||||||||||||||||||
Domestic | $ | 44.4 | $ | 42.6 | $ | 41.1 | $ | 43.2 | $ | 171.2 | $ | 41.6 | $ | 34.0 | $ | 75.6 | ||||||||||
Offshore | $ | 21.1 | $ | 19.4 | $ | 17.8 | $ | 18.8 | $ | 77.1 | $ | 18.2 | $ | 17.0 | $ | 35.1 | ||||||||||
Nearshore | $ | 12.2 | $ | 12.1 | $ | 10.5 | $ | 9.7 | $ | 44.3 | $ | 9.4 | $ | 8.7 | $ | 18.1 | ||||||||||
Other | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2.5 | ) | $ | — | $ | (2.5 | ) | ||||||||
Company Total | $ | 77.7 | $ | 74.0 | $ | 69.4 | $ | 71.6 | $ | 292.6 | $ | 66.6 | $ | 59.7 | $ | 126.3 | ||||||||||
Revenue % | ||||||||||||||||||||||||||
Domestic | 57.1 | % | 57.5 | % | 59.2 | % | 60.3 | % | 58.5 | % | 62.4 | % | 56.9 | % | 59.8 | % | ||||||||||
Offshore | 27.2 | % | 26.2 | % | 25.7 | % | 26.2 | % | 26.3 | % | 27.3 | % | 28.4 | % | 27.8 | % | ||||||||||
Nearshore | 15.7 | % | 16.3 | % | 15.1 | % | 13.5 | % | 15.2 | % | 14.1 | % | 14.6 | % | 14.3 | % | ||||||||||
Other | — | % | — | % | — | % | — | % | — | % | (3.8 | )% | — | % | (2.0 | )% | ||||||||||
Company Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Gross Profit (millions) | ||||||||||||||||||||||||||
Domestic | $ | 1.5 | $ | 2.6 | $ | 1.6 | $ | 1.6 | $ | 7.3 | $ | 2.5 | $ | 0.7 | $ | 3.2 | ||||||||||
Offshore | $ | 6.2 | $ | 4.3 | $ | 4.1 | $ | 4.2 | $ | 18.8 | $ | 5.3 | $ | 4.5 | $ | 9.8 | ||||||||||
Nearshore | $ | 2.3 | $ | 2.1 | $ | 1.5 | $ | 0.2 | $ | 6.2 | $ | 0.1 | $ | — | $ | 0.2 | ||||||||||
Other | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2.5 | ) | $ | — | $ | (2.5 | ) | ||||||||
Company Total | $ | 10.0 | $ | 9.0 | $ | 7.3 | $ | 6.0 | $ | 32.4 | $ | 5.5 | $ | 5.2 | $ | 10.7 | ||||||||||
Gross Profit % | ||||||||||||||||||||||||||
Domestic | 3.4 | % | 6.0 | % | 4.0 | % | 3.7 | % | 4.3 | % | 6.1 | % | 2.1 | % | 4.2 | % | ||||||||||
Offshore | 29.2 | % | 22.2 | % | 23.2 | % | 22.4 | % | 24.4 | % | 29.2 | % | 26.5 | % | 27.9 | % | ||||||||||
Nearshore | 19.2 | % | 17.7 | % | 14.8 | % | 2.3 | % | 14.1 | % | 1.4 | % | 0.4 | % | 0.9 | % | ||||||||||
Other | — | % | — | % | — | % | — | % | — | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Company Total | 12.9 | % | 12.1 | % | 10.6 | % | 8.4 | % | 11.1 | % | 8.2 | % | 8.8 | % | 8.5 | % |
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