Customer Experience, Service & Success

Startek Reports Second Quarter 2022 Financial Results

Continued Progress in Commercial Development Resulted in Seven New Logos Under Contract

Startek, Inc. (NYSE: SRT) (“Startek” or the “Company”), a global customer experience (CX) solutions provider, is reporting financial results for the second quarter ended June 30, 2022.

[1]   Reflects net income attributable to Startek shareholders.

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

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

Management Commentary

“Our second quarter results were in-line with our expectations as we operated against the backdrop of shifting market conditions,” said Bharat Rao, Global CEO of Startek. “Although our revenue declined on a quarter-over-quarter basis, the prior year quarter benefited from larger, one-off revenue sources with the COVID vaccination support program. With the ongoing ramp up of client services, specifically in India, we experienced a slight compression of margin through the necessary onboarding of additional support agents, though we expect to fully regain the onboarding profitability impact in the coming quarters.

“We achieved a significant milestone with our sales efforts, winning seven new logos in the second quarter, which we expect will begin flowing through to our financials in 2023 after the initial onboarding stage. We also entered into several expanded contracts with existing clients in our telecom, financial and business services, and travel and hospitality verticals as we further showcase our enhanced capabilities and services. Our expanded product platform was highlighted by the launch of Startek Agent AI as well as our new partnership with Genesys, both designed to streamline contact center processes and enhance our support agents’ ability to deliver high empathy engagements. Our investments into our sales and marketing strategy are also showing signs of return, generating a growth of inbound proposals by prospective customers, particularly in the U.S. With a strong focus on business development efforts, along with the hiring and training of customer service teams to handle increased service volumes, our second quarter positioned Startek to tackle future growth opportunities that we have secured from our bolstered sales pipeline.

“Looking into the back half of the year, we will continue growing our platform through increasing our services within our core verticals, expanding our marketing initiatives and capitalizing on our growing sales pipeline to drive new logos. As we expand our platform, we also look to continue driving new digital partnerships and ensuring that Startek remains at the technological forefront for our customers. It is imperative that our host of services remain competitive in a dynamic landscape and we will continue to drive innovation to our platform. We believe we are well positioned for growth, and we look forward to expanding our footprint as a global customer experience solutions provider.”

Second Quarter 2022 Financial Summary

Net revenue in the second quarter was $167.6 million compared to $189.0 million in the year-ago quarter. The decrease was driven by the prior year quarter, including a short-term government program relating to COVID vaccination that drove an outsized benefit to revenue. The Company also experienced revenue decline related to the termination of an ecommerce-client in the first quarter of 2022, offset by continued strength in the Company’s telecom, financial and business services and travel and hospitality verticals. On a constant currency basis, net revenue decreased 9% compared to the year-ago quarter.

Gross profit in the second quarter was $16.7 million compared to $24.6 million in the year-ago quarter. Gross margin was 10.0% compared to 13.0% in the year-ago quarter. The decrease was attributable to wage increases led by inflationary pressures and an increase in upfront cost incurred in recruitment and training in preparation for a ramp up of services with clients in the ecommerce vertical.

Selling, general and administrative (SG&A) expenses in the second quarter increased to $13.7 million compared to $12.3 million in the year-ago quarter. As a percentage of revenue, SG&A was 8.2% compared to 6.5% in the year-ago quarter. The increase is primarily due to the Company’s ongoing investments in sales and marketing initiatives, as well as an increased cost related to insurance premiums. The SG&A costs for the current period includes costs incurred towards the ongoing take private transaction.

Net income attributable to Startek shareholders in the second quarter was $1.9 million or $0.05 per share, compared to a net income of $6.9 million or $0.17 per share in the year-ago quarter.

Adjusted net income* in the second quarter was $5.2 million or $0.13 per diluted share, compared to an adjusted net income* of $9.9 million or $0.24 per diluted share in the year-ago quarter.

Adjusted EBITDA* in the second quarter was $11.1 million compared to $19.6 million in the year-ago quarter. The primary driver for the decline was the aforementioned decrease in gross profit and increase in SG&A expenses incurred.

On June 30, 2022, cash and restricted cash was $55.8 million[1] compared to $52.2 million at March 31, 2022. Total debt at June 30, 2022 was $170.7 million compared to $169.5 million at March 31, 2022, and net debt at June 30, 2022 was $114.9 million[2] compared to $117.3 million at March 31, 2022.

*A non-GAAP measure defined below.

Conference Call and Webcast Details

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

Date: Monday, August 8, 2022
Time: 5 p.m. ET
Toll-free dial-in number: 1-844-826-3035
International dial-in number: 1-412-317-5195
Conference ID: 10169253

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 Group, Inc. 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 A telephonic replay of the conference call will also be available after 8 p.m. ET on the same day through August 15, 2022.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10169253

[1] Cash balance excluding restricted cash as at June 30, 2022 amounted to $47.2 million as compared to $43.3 million as at March 31, 2022.
[2] Net debt excluding restricted cash balance at June 30, 2022 was $123.5 million compared to $126.2 million at March 31, 2022.

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