STARTEK Reports Fourth Quarter and Full Year 2015 Results

Q4 Revenue up 28% to $82.3 Million; Adj. EBITDA up 106% to $4.8 million

GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)-- StarTek, Inc. ("STARTEK") (NYSE: SRT), a provider of business process outsourcing services, has reported its fourth quarter and full year 2015 financial results.

Fourth Quarter 2015 Highlights

• Total revenue increased 28% to $82.3 million versus the year-ago quarter
• Revenue from newer verticals such as healthcare, financial services, and retail increased 135% to $26.3 million versus the year-ago quarter, representing 32% of total revenue compared to 17%
• Adjusted EBITDA (a non-GAAP measure defined below) increased 106% to $4.8 million versus the year-ago quarter
• Net income up significantly to $0.3 million or $0.02 per share compared to net loss of $1.6 million or $(0.10) per share in the year-ago quarter
• Won $10 million of new business (annual contract value) by adding two new clients and expanding current client engagements
• Ended year with the most client and revenue diversification in STARTEK history
• Appointed Don Norsworthy as the company’s new Chief Financial Officer

Management Commentary

“The fourth quarter marked an important milestone for STARTEK as we returned to profitability,” said Chad Carlson, CEO of STARTEK. “Contributing to these results was the successful integration of ACCENT with the STARTEK Advantage System, and the realization of expected synergies and other cost reduction initiatives. Also contributing to these results were strong seasonal client volumes and a dramatically greater percentage of revenue from newer verticals, which demonstrates the continued diversification of our client base.

“In 2016, we will continue to focus on winning new business, optimizing contracts and capacity, and improving efficiency to expand margins. These initiatives, coupled with the added scale and revenue diversification we’ve achieved, should position STARTEK for sustainable, predictable, and profitable growth.”

Fourth Quarter 2015 Financial Results

Total revenue in the fourth quarter of 2015 increased 28% to $82.3 million from $64.2 million in the fourth quarter of 2014. This was largely attributable to contribution from ACCENT, which was acquired on June 1, 2015, as well as new client wins and growth from existing clients. Seasonal demand was also strong. The increase in revenue was partially offset by a decrease in volumes from one of the company's larger clients compared to the year-ago quarter.

Gross margin in the fourth quarter of 2015 increased to 11.8% compared to 11.7% in the year-ago quarter.

Selling, general and administrative (SG&A) expenses were $8.4 million in the fourth quarter of 2015 compared to $8.3 million in the year-ago quarter. As a percentage of revenue, SG&A decreased 270 basis points to 10.3% compared to 13.0% in the year-ago quarter.

Adjusted EBITDA in the fourth quarter increased 106% to $4.8 million compared to $2.3 million in the year-ago quarter. The increase was due to the aforementioned new client wins, cost reduction initiatives and contribution from ACCENT.

Net income increased significantly in the fourth quarter to $0.3 million or $0.02 per share, compared to a net loss of $1.6 million or $(0.10) per share in the year-ago quarter.

At December 31, 2015, the company’s cash position was $2.6 million compared to $5.3 million at December 31, 2014, with a balance outstanding of $32.2 million on its $50 million credit facility.

Full Year 2015 Financial Results

Total revenue in 2015 increased 13% to $282.1 million compared to $250.1 million in 2014.

Gross margin was 8.6% in 2015 compared to 12.2% in 2014.

SG&A expenses in 2015 increased to $34.4 million compared to $31.4 million in 2014. As a percentage of revenue, SG&A decreased 40 basis points to 12.2% in 2015 compared to 12.6% in 2014.

Adjusted EBITDA in 2015 was $4.6 million compared to $11.5 million in 2014.

Net loss was $15.6 million or $(1.01) per share in 2015, compared to a net loss of $5.4 million or $(0.35) per share in 2014.

Conference Call and Webcast Details

STARTEK will hold a conference call today at 5:00 p.m. Eastern time to discuss its fourth quarter and full year 2015 results. Management will host the conference call, followed by a question and answer period.

Date: Thursday, February 18, 2016Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)Toll-free dial-in number: 1-800-734-0036International dial-in number: 1-210-591-1064Conference ID: 39207012

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 Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay via the investor relations section of the STARTEK website. A replay of the conference call will be available after 9:00 p.m. Eastern time on the same day through February 25, 2016.

Toll-free replay number: 1-404-537-3406International replay number: 1-855-859-2056Replay ID: 39207012

About STARTEK

STARTEK strives to be the most trusted BPO service provider delivering comprehensive contact center and customer engagement solutions. Our employees, whom we call Brand Warriors, are enabled and empowered to promote and protect our client’s brand. For over 25 years, these Brand Warriors have been committed to making a positive impact for our clients’ business results, enhancing the customer experience while reducing costs for our clients. With the latest technology in the BPO industry and our STARTEK Advantage System, our Brand Warriors instill customer loyalty through a variety of multi-channel customer interactions, including voice, chat, email and IVR. Our service offerings include sales support, order processing, customer care and receivables management and customer analytics. For more information, 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. 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. In addition, factors related to our acquisition of ACCENT that may cause actual results to differ include our ability to integrate the organizations to recognize expected financial benefits and synergies and our ability to retain employees and customers of the acquired business. 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, 2014 and the Company's Form 10-Q for the quarter ended September 30, 2015 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 operation.

STARTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
			Three Months EndedDecember 31,										Twelve Months EndedDecember 31,
			2015					2014					2015					2014
Revenue			$	82,260				$	64,178				$	282,134				$	250,080
Cost of services			72,546					56,662					257,830					219,608
Gross profit			9,714					7,516					24,304					30,472
Selling, general and administrative expenses			8,447					8,345					34,427					31,397
Impairment losses and restructuring charges, net			658					461					3,890					3,965
Operating income (loss)			609					(1,290		)			(14,013		)			(4,890		)
Interest and other income (expense), net			(381		)			(222		)			(1,139		)			(6		)
Income (loss) before income taxes			228					(1,512		)			(15,152		)			(4,896		)
Income tax (benefit) expense			(105		)			81					464					564
Net income (loss)			$	333				$	(1,593	)			$	(15,616	)			$	(5,460	)
Net income (loss) per common share - basic			0.02					(0.10		)			(1.01		)			(0.35		)
Net income (loss) per common share - diluted			0.02					(0.10		)			(1.01		)			(0.35		)
Weighted average shares outstanding - basic			15,605					15,410					15,529					15,394
Weighted average shares outstanding - diluted			15,835					15,410					15,529					15,394

STARTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
			As of
			December 31,2015					December 31,2014
ASSETS
Current assets:
Cash and cash equivalents			$	2,626				$	5,306
Trade accounts receivable, net			57,941					46,103
Other current assets			3,451					3,099
Total current assets			64,018					54,508
Property, plant and equipment, net			30,364					28,180
Other assets			21,292					11,105
Total assets			$	115,674				$	93,793
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities			$	63,698				$	31,672
Other liabilities			10,051					7,440
Total liabilities			73,749					39,112
Total stockholders’ equity			41,925					54,681
Total liabilities and stockholders' equity			$	115,674				$	93,793

STARTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
			Three Months EndedDecember 31,										Twelve Months EndedDecember 31,
			2015					2014					2015					2014
Net income (loss)			$	333				$	(1,593	)			$	(15,616	)			$	(5,460	)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization			3,458					2,750					13,261					10,379
(Gains) losses on sales/impairments of assets			323					45					(186		)			(136		)
(Gain) on dissolution of subsidiary			—					—					—					(413		)
Non-cash compensation cost			93					418					1,469					1,625
Amortization of deferred gain on sale leaseback transaction			—					(62		)			(168		)			(276		)
Changes in operating assets & liabilities and other, net			(5,190		)			(132		)			(3,114		)			(1,339		)
Net cash provided by operating activities			(983		)			1,426					(4,354		)			4,380
Investing Activities
Purchases of property, plant and equipment			(1,222		)			(2,100		)			(7,722		)			(11,661		)
Proceeds from sale of assets			—					71					982					1,135
Proceeds from note receivable			—					164					—					645
(Cash paid) received for acquisitions of businesses			651					(2,816		)			(18,258		)			(3,419		)
Net cash (used in) investing activities			(571		)			(4,681		)			(24,998		)			(13,300		)
Financing Activities
Other financing, net			3,556					1,974					26,519					3,416
Net cash provided by financing activities			3,556					1,974					26,519					3,416
Effect of exchange rate changes on cash			(190		)			35					153					(179		)
Net (decrease) increase in cash and cash equivalents			1,812					(1,246		)			(2,680		)			(5,683		)
Cash and cash equivalents at beginning of period			$	814				$	6,552				$	5,306				$	10,989
Cash and cash equivalents at end of period			$	2,626				$	5,306				$	2,626				$	5,306

STARTEK, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP MEASURES(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 in this press release or 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.

The Company defines non-GAAP Adjusted EBITDA 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 share-based compensation expense. 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 helps investors and analysts assess the strength and performance of our ongoing operations.

Management believes that 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 31,2015					December 31,2014					December 31,2015					December 31,2014
Net income (loss)			$	333				$	(1,593	)			$	(15,616	)			$	(5,460	)
Income tax (benefit) expense			(105		)			81					464					564
Interest expense, net			381					172					1,683					606
Impairment losses and restructuring charges, net			658					461					3,890					3,965
Depreciation and amortization expense			3,458					2,750					13,261					10,379
(Gains) losses on disposal of assets			—					45					(509		)			(136		)
Share-based compensation expense			93					418					1,469					1,625
Adjusted EBITDA			$	4,818				$	2,334				$	4,642				$	11,543

Operating Results Scorecard
As of December 31, 2015
			Q1-14				Q2-14				Q3-14				Q4-14				2014					Q1-15				Q2-15				Q3-15				Q4-15				2015
Revenue (millions)
Domestic			$	33.3			$	30.9			$	30.7			$	35.6			$	130.6				$	35.6			$	37.1			$	44.6			$	52.7			$	169.9
Offshore			$	21.1			$	21.0			$	22.5			$	21.2			$	85.8				$	20.3			$	18.1			$	17.1			$	17.3			$	72.9
Nearshore			$	8.8			$	9.3			$	8.3			$	7.3			$	33.7				$	7.7			$	8.2			$	11.1			$	12.3			$	39.3
Company Total			$	63.2			$	61.3			$	61.4			$	64.2			$	250.1				$	63.7			$	63.5			$	72.8			$	82.3			$	282.1
Revenue %
Domestic			52.7		%		50.5		%		50.0		%		55.5		%		52.2		%			56.0		%		58.5		%		61.2		%		64.0		%		60.2		%
Offshore			33.3		%		34.3		%		36.6		%		33.1		%		34.3		%			31.9		%		28.6		%		23.6		%		21.0		%		25.8		%
Nearshore			14.0		%		15.2		%		13.5		%		11.4		%		13.5		%			12.1		%		13.0		%		15.2		%		14.9		%		13.9		%
Company Total			100.0		%		100.0		%		100.0		%		100.0		%		100.0		%			100.0		%		100.0		%		100.0		%		100.0		%		100.0		%
Gross Profit(millions)
Domestic			$	4.5			$	2.6			$	3.0			$	2.7			$	12.9				$	2.4			$	2.2			$	0.3			$	6.7			$	11.6
Offshore			$	3.6			$	2.6			$	5.1			$	3.9			$	15.2				$	2.5			$	1.8			$	1.2			$	1.1			$	6.7
Nearshore			$	0.1			$	0.4			$	0.9			$	0.9			$	2.3				$	1.2			$	1.3			$	1.6			$	1.9			$	6.0
Company Total			$	8.2			$	5.7			$	9.0			$	7.5			$	30.5				$	6.1			$	5.3			$	3.2			$	9.7			$	24.3
Gross Profit %
Domestic			13.6		%		8.5		%		9.9		%		7.6		%		9.9		%			6.8		%		6.0		%		0.7		%		12.7		%		6.8		%
Offshore			17.1		%		12.5		%		22.6		%		18.3		%		17.7		%			12.4		%		10.0		%		7.2		%		6.4		%		9.2		%
Nearshore			0.8		%		4.5		%		11.2		%		12.7		%		6.9		%			15.4		%		15.6		%		14.5		%		15.8		%		15.3		%
Company Total			13.0		%		9.3		%		14.7		%		11.7		%		12.2		%			9.6		%		8.4		%		4.3		%		11.8		%		8.6		%

View source version on businesswire.com: http://www.businesswire.com/news/home/20160218006503/en/

Liolios for STARTEK
Investor Relations
Cody Slach or Sean Mansouri
949-574-3860
[email protected]

Source: STARTEK

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