8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 10, 2020

STARTEK, INC.

(Exact name of Registrant as specified in its charter)

Delaware	1-12793	84-1370538
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

6200 South Syracuse Way, Suite 485, Greenwood Village CO 80111

(Address of principal executive offices; zip code)

Registrant’s telephone number, including area code: (303) 262-4500

(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

☐ 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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	SRT	New York Stock Exchange, Inc.

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act . ☐

Item 2.02 Results of Operations and Financial Condition.

On June 10, 2020, Startek, Inc. (the “Company”) issued a press release reporting its earnings for its First quarter ended March 31, 2020. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. This press release shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 9.01 Financial Statements and Exhibits.

Exhibit Number  Exhibit Description

99.1	Press Release dated June 10, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	STARTEK, INC.
June 10, 2020	By:	/s/ Ramesh Kamath
		Ramesh Kamath Chief Financial Officer

EX-99.1

Exhibit 99.1

Company has Taken Swift Measures to Counter the Impact from COVID-19

GREENWOOD VILLAGE, CO – June 10, 2020 - Startek, Inc. (NYSE:SRT), a global provider of customer experience management solutions, is reporting financial results for the quarter ended March 31, 2020.

Management Commentary                                             

“Since the onset of the pandemic, we have continued to prioritize our employees’ health and safety while providing ongoing support for our clients,” said Aparup Sengupta, Executive Chairman and Global CEO of Startek. “As a global company, the degree of COVID-19 related impacts to our business has varied by geography. However, I can proudly state that we have taken very effective measures to partially offset the impact of this unprecedented challenge faced by the world.

“Beginning in late March, we experienced sudden lockdowns and movement restrictions which impacted our operations. We quickly enabled employees to work from home in many of our geographies after gaining approval from clients and other regulatory authorities. As more economies begin to reopen, we are preparing our delivery campuses to operate efficiently with proper safety and social distancing standards. However, we plan to remain flexible with our business operations until we are certain of what the new normal will be.”

Rajiv Ahuja, President of Startek added, “the demand from our clients remains very strong, particularly within our largest verticals, such as telecom, e-commerce, media/cable, and healthcare. As we look ahead, like most businesses around the world, we cannot predict the full impact from COVID-19, as the aftermath from the pandemic and its effect on the global economy remains uncertain. Nevertheless, we expect to continue adapting to the new environment accordingly, with a key focus on cost controls and managing adequate liquidity.

“I am incredibly proud of our team for their hard work and dedication to serving our clients despite the various challenges we have faced, and our deepest condolences go to all the families dealing with the health and economic consequences of this tragic pandemic.”

First Quarter 2020 Financial Results

Net revenue for the quarter was $160.9 million compared to $161.1 million in the first quarter of 2019. Net revenue in the first quarter was impacted by the COVID-19 lockdowns in most geographies.

Gross profit in the first quarter was $20.1 million compared to $27.2 million in the year ago quarter. Gross margin was 12.5% compared to 16.9% in the year ago quarter. Lower gross margins was primarily driven by higher costs relative to revenues as a result of the COVID-19 lockdowns in geographies such as India, Philippines and Honduras.

Selling, general and administrative (SG&A) expenses decreased to $17.3 million compared to $24.1 million in the year-ago quarter. As a percentage of revenue, SG&A improved 420 basis points to 10.7% compared to 14.9% in the year-ago quarter as the company has implemented a series of cost reductions over the last 12 months. This is also reflected in the sequential decline in SG&A costs over the last three quarters.

Net loss attributable to Startek shareholders for the quarter was $26.6 million or $(0.69) per share, compared to a net loss of $3.3 million or $(0.09) per share in the year-ago quarter. Net loss in the first quarter of 2020 included an approximate $22.7 million goodwill impairment primarily due to COVID-19 related forecasted declines in the Company’s business in India, South Africa, and Australia.

Adjusted net loss* in the first quarter of 2020 was $0.7 million, or $(0.02) per share, compared to an adjusted net loss* of $0.3 million or $(0.01) in the first quarter of 2019.

Adjusted EBITDA* for the quarter was $10.5 million compared to $10.9 million in the year-ago quarter.

At March 31, 2020, cash and restricted cash increased to $39.7 million compared to $32.6 million at December 31, 2019. Total debt at the end of the quarter was $175.2 million compared to $174.7 million at the end of 2019. This resulted in a reduction of net debt to $135.5 million compared to $142.1 million. The company continues to focus on ensuring adequate liquidity for future needs and is comfortable with its cash balance today.

*A non-GAAP measure defined below.

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: Wednesday, June 10, 2020

Time: 5:00 p.m. Eastern time

Toll-free dial-in number: (844) 239-5283

International dial-in number: (574) 990-1022

Conference ID: 3042088

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 June 17, 2020.

Toll-free replay number: (855) 859-2056

International replay number: (404) 537-3406

Replay ID: 3042088

About Startek

Startek is a leading global provider of technology-enabled business process outsourcing solutions. The company provides omni-channel customer experience management, back office and technology services to corporations around the world across a range of industries. The company has more than 45,000 outsourcing experts across 49 delivery campuses worldwide that are committed to delivering transformative customer experience for clients. Services include omni-channel customer care, customer acquisition, order processing, technical support, receivables management and analytics through automation, voice, chat, email, social media and IVR, resulting in superior business results for its clients. 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, 2019, as filed with the SEC on March 14, 2019, 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 Securities and Exchange Commission, 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.

Investor Relations

Sean Mansouri, CFA or Cody Slach

Gateway Investor Relations

(949) 574-3860

investor@startek.com

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Revenue		161,177			161,142
Warrant contra revenue		(278	)		-
Net Revenue		160,899			161,142
Cost of services		(140,841	)		(133,928	)
Gross profit		20,058			27,214
Selling, general and administrative expenses		(17,255	)		(24,079	)
Impairment losses and restructuring/exit cost		(24,322	)		(1,129	)
Acquisition related cost		-			35
Operating (Loss) / Income		(21,519	)		2,042
Share of (loss) / profit of equity accounted investees		(8	)		342
Interest expense, net		(3,506	)		(4,465	)
Exchange gain / (loss), net		1,928			(691	)
Loss before income taxes		(23,105	)		(2,772	)
Income tax expense		2,876			385
Net loss		(25,981	)		(3,157	)
Net income attributable to non-controlling interests		576			189
Net loss attributable to Startek shareholders		(26,557	)		(3,346	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(4,392	)		567
Change in fair value of derivative instruments		(672	)		(65	)
Pension amortization		396			176
Comprehensive loss		(30,649	)		(2,479	)
Comprehensive income attributable to non-controlling interests		739			276
Comprehensive loss attributable to Startek shareholders		(31,388	)		(2,755	)
Net loss per common share - basic and diluted		(0.69	)		(0.09	)
Weighted average common shares outstanding - basic and diluted		38,528			37,522

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	March 31,			December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents		27,795			20,464
Restricted cash		11,862			12,162
Trade accounts receivable, net		100,152			108,479
Unbilled Revenue		40,586			41,449
Prepaid and other current assets		19,516			12,008
Total current assets		199,911			194,562
Property, plant and equipment, net		34,133			37,507
Operating lease Right-of-use assets		79,370			73,692
Intangible assets, net		108,225			110,807
Goodwill		196,633			219,341
Investment in associates		477			553
Deferred tax assets, net		3,009			5,251
Prepaid expenses and other non-current assets		15,568			16,370
Total assets		637,326			658,083
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		20,004			25,449
Accrued expenses and other current liabilities		89,600			82,598
Short term debt		32,387			26,491
Current maturity of long term debt		18,666			17,601
Current maturity of operating lease liabilities		20,761			19,677
Current maturity of finance lease obligations		750			632
Total current liabilities		182,168			172,448
Long term debt		123,387			130,144
Operating lease liabilities		59,404			54,341
Other non-current liabilities		12,881			11,140
Deferred tax liabilities, net		17,739			18,226
Total liabilities		395,579			386,299
Commitments and contingencies		—			—
Stockholders’ equity:
Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 38,541,724 and 38,525,636 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		385			385
Additional paid-in capital		277,852			276,827
Accumulated other comprehensive loss		(10,853	)		(6,022	)
Accumulated deficit		(73,115	)		(46,145	)
Equity attributable to Startek shareholders		194,269			225,045
Non-controlling interest		47,478			46,739
Total stockholders’ equity		241,747			271,784
Total liabilities and stockholders’ equity		637,326			658,083

STARTEK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Operating Activities
Net loss	$	(25,981	)	$	(3,157	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		7,093			7,304
Impairment of goodwill		22,708			-
Profit on sale of property, plant and equipment		-			(251	)
Provision for doubtful accounts		154			630
Warrant contra revenue		278			-
Share-based compensation expense		291			425
Deferred income taxes		1,879			(659	)
Share of (loss) / profit of equity accounted investee		8			(342	)
Changes in operating assets and liabilities:
Trade accounts receivable		4,503			4,384
Prepaid expenses and other assets		(7,658	)		(8,789	)
Trade accounts payable		(4,722	)		(79	)
Income taxes, net		(672	)		(948	)
Accrued expenses and other current liabilities		12,287			1,105
Net cash (used in) / generated from operating activities	$	10,168		$	(377	)
Investing Activities
Purchases of property, plant and equipment		(2,884	)		(3,495	)
Net cash used in generated investing activities	$	(2,884	)	$	(3,495	)
Financing Activities
Proceeds from the issuance of common stock		43			515
Payments on long term debt		(4,200	)		(1,400	)
Proceeds from (payments on) other debt, net		4,956			6,102
Net cash generated generated from financing activities	$	799		$	5,217
Net increase in cash and cash equivalents		8,083			1,345
Effect of exchange rate changes on cash and cash equivalents and restricted cash		(1,052	)		(226	)
Cash and cash equivalents and restricted cash at beginning of period		32,626			24,569
Cash and cash equivalents and restricted cash at end of period	$	39,657		$	25,688
Components of cash and cash equivalents and restricted cash
Balances with banks		27,795			14,595
Restricted cash		11,862			11,093
Total cash and cash equivalents and restricted cash	$	39,657		$	25,688

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, Depreciation and amortization expense, Restructuring and other acquisition related cost, 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 our 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 our ongoing operations that we believe is 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 March
	2020	2019
Net Loss	(25,981)	(3,157)
Income tax expense	2,876	385
Interest and other expense, net	1,586	4,814
Depreciation and amortization expense	7,093	7,304
Impairment losses and restructuring/exit cost	24,322	1,093
Share-based compensation expense	291	425
Warrant contra revenue	278	-
Adjusted EBITDA	10,465	10,864

Adjusted EPS:
	Three Months Ended March
	2020	2019
Loss attributable to Startek shareholders	(26,557)	(3,346)
Add: Share based compensation expense	291	425
Add: Amortization of intangible assets	2,582	2,628
Add: Warrant contra revenue	278	-
Add: Goodwill impairment loss	22,708	-
Adjusted net loss (non-GAAP)	(698)	(293)
Weighted average common shares outstanding - Basic & Diluted	38,528	37,522
Adjusted EPS - Basic & Diluted	(0.02)	(0.01)

XML

Document And Entity Information	Jun. 10, 2020
Document Information [Line Items]
Entity, Registrant Name	STARTEK, INC.
Document, Type	8-K
Document, Period End Date	Jun. 10, 2020
Entity, Incorporation, State or Country Code	DE
Entity, File Number	1-12793
Entity, Tax Identification Number	84-1370538
Entity, Address, Address Line One	6200 South Syracuse Way
Entity, Address, Address Line Two	Suite 485
Entity, Address, City or Town	Greenwood Village
Entity, Address, State or Province	CO
Entity, Address, Postal Zip Code	80111
City Area Code	303
Local Phone Number	262-4500
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	SRT
Security Exchange Name	NYSE
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0001031029