Fourth Quarter Revenue of $51 Million; Annual Revenue of $219 Million

Company Website: http://www.StarTek.com
DENVER -- (Business Wire)

StarTek, Inc. (NYSE:SRT) today announced its financial results for the fourth quarter and full year ended December 31, 2011. The Company reported fourth quarter 2011 revenue of $51.1 million and annual revenue of $219.5 million. Net loss was $0.49 per share in the fourth quarter of 2011 and $1.75 per share for the year ended December 31, 2011.

Fourth Quarter 2011 Financial Results

Fourth quarter 2011 revenue decreased 1.1% compared to the third quarter of 2011. Revenue was down slightly from third quarter due to lower volumes in North America and the closure of the Company’s Kingston, Ontario facility in September 2011. The North American decline was partially offset by Offshore revenue growth, which increased by $3.4 million, or 20.5%, compared to the third quarter of 2011 as the Company continued to ramp new business in these locations.

Gross margin grew to 10.8% in the fourth quarter of 2011 from 7.3% in the third quarter of 2011. The improvement was due to continued growth in Offshore gross margin, which improved from 10.6% in the third quarter to 16.9% in the fourth quarter driven by better utilization as the Company added nearly 900 full-time equivalent agents in this segment compared to the third quarter of 2011. In the fourth quarter of 2011, Offshore gross profit represented 61% of the Company’s total gross profit compared to 47% in the third quarter and 11% in the fourth quarter of 2010.

SG&A expense for the quarter totaled $11.0 million, compared to $10.0 million in the third quarter of 2011. The increase was due mostly to $0.7 million of severance costs in the fourth quarter primarily for the Company’s former Chief Financial Officer.

The Company reported a fourth quarter 2011 operating loss before impairment and restructuring charges of $5.4 million and adjusted EBITDA of negative $1.2 million, compared to a third quarter 2011 operating loss before impairment and restructuring of $6.5 million and adjusted EBITDA of negative $2.3 million. The Company had a net loss of $7.5 million, or $0.49 per share, during the fourth quarter of 2011. The fourth quarter 2011 net loss compares to a net loss of $6.8 million, or $0.45 per share, in the third quarter of 2011.

2011 Financial Results

In 2011, revenue decreased 17.3% from $265 million in 2010 to $219 million. Gross margin grew slightly to 10.5% in 2011, compared to 10.4% in 2010. SG&A expense totaled $44.1 million in 2011, compared to $43.3 million in 2010. Excluding severance expense and legal fees related to the settlement of an employee labor relations lawsuit, SG&A expense would have been $39.9 million in 2011, compared to $42.1 million in 2010. Operating loss before impairment and restructuring charges was $21.1 million in 2011 and adjusted EBITDA was negative $3.8 million, compared to 2010 operating loss before impairment and restructuring of $15.6 million and 2010 adjusted EBITDA of $3.9 million. Net loss for the full year 2011 was $1.75 per share compared to a net loss of $1.30 per share in 2010.

Liquidity and Capital Resources

The Company ended 2011 with approximately $9.7 million in cash and cash equivalents and no debt, compared to $11.5 million and no debt at September 30, 2011. During the quarter, the Company implemented enhanced cash management practices to limit discretionary spending and monitor its capital expenditures, which management believes will help provide a foundation to return to positive adjusted EBITDA and working capital in 2012. The Company had $1.5 million and $9.0 million in capital expenditures during the quarter and year ending December 31, 2011, respectively.

2011 Operational Highlights

During the year, the Company:

• Continued its sales momentum, signing eight new agreements with an expected annual contract value of nearly $29 million;
• Experienced revenue growth of 17% in its client base, exclusive of its two largest customers, compared to 2010;
• Expanded its international presence by opening a second Latin American facility with commitments from an existing client;
• Continued growth in the Philippines, increasing the annual number of full-time equivalent agents to nearly 2,500, representing an increase of 86% over last year;
• Reduced its North American footprint by closing its Alexandria, Louisiana site and one of its Kingston, Ontario sites as well as downsizing its Cornwall, Ontario and Collinsville, Virginia sites;
• Reduced its revenue concentration from its largest customer from 66% in 2010 to 58% in 2011;
• Made performance improvements among several clients and strengthened its operating and IT leadership teams to position the Company for future growth; and
• Assembled a strong leadership team including the appointment of a new Chief Executive Officer, SVP of Sales & Marketing, Chief Technology Officer and Chief Financial Officer.

“Great strides were made during the year to lay the foundation for future growth by establishing the StarTek Operating Platform, making performance improvements with several of our clients, expanding our sales pipeline and securing new business, enhancing cash management practices and building a more effective leadership team,” said Chad Carlson, President and Chief Executive Officer. “These foundational elements will continue to enable and empower momentum through 2012, and we expect to exit the year in a stronger operating and financial position.”

For additional information on revenue, margin and operating metrics, please refer to the Financial Scorecard posted on the Investor Relations section of the Company’s website (investor.startek.com). Further details regarding the earnings call are described below.

Conference Call and Webcast Details

The Company will host a conference call today, February 23, 2012, at 9:00 a.m. MST (11:00 a.m. EST) to discuss its fourth quarter and full year 2011 financial results. To participate in the teleconference, please call toll-free 866-730-5763 (or 857-350-1587 for international callers) and enter “56219404”. You may also listen to the teleconference live via the Company’s website at www.startek.com. For those that cannot access the live broadcast, a replay will be available on the Company’s website at www.startek.com.

About StarTek

StarTek, Inc. (NYSE: SRT) is a global provider of business process outsourcing services with over 9,000 employees committed to making a positive impact on our clients’ business results for 25 years and counting. Our company mission is to enable and empower our Brand Warriors to fight for our clients' brands every day to bring value to our stakeholders. We accomplish this by developing goal congruency with our clients’ business objectives resulting in a trusted partnership. The StarTek Advantage is the sum total of our culture, customized solutions and processes that solve our clients’ service challenges. It drives improved customer experiences and reduced costs. StarTek has proven results for the multiple services we provide including sales, order management and provisioning, customer care, technical support, receivables management, and retention programs. We manage programs using a variety of multi-channel customer interaction capabilities including voice, chat, email, IVR and back-office support. StarTek has delivery centers in the U.S., Philippines, Canada, Costa Rica and Honduras and virtually through its StarTek@Home workforce. For more information, visit www.StarTek.com or call +1 303.262.4500.

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 two significant customers, consolidation by our clients, the concentration of our business in the telecommunications industry, pricing pressure, maximization of capacity utilization, lack of success of our clients’ products and services, consolidation of vendors by our clients, interruptions to the Company’s business due to geopolitical conditions and/or natural disasters, foreign currency exchange risk, lack of minimum purchase requirements in our contracts, ability to hire and retain qualified employees, the timely development of new products or services, failure to implement new technological advancements, increases in labor costs, lack of wide geographic diversity, continuing unfavorable economic conditions, our ability to effectively manage growth, increases in the cost of telephone and data services, unauthorized disclosure of confidential client or client customer information, risks inherent in the operation of business outside of North America, ability of our largest stockholder to affect decisions, stock price volatility, variation in quarterly operating results, inability to renew or replace sources of capital funding and, should we make acquisitions, the effective and timely integration of such acquisitions. 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, 2010, as well as Item 1A. – Risk Factors and all other disclosures in the Company’s subsequent Form 10-Qs, 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
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Dollars in thousands)
(Unaudited)

The information presented in this press release reports 1) adjusted EBITDA, which the Company defines as net income (loss) plus income tax expense, interest income (expense), impairment and restructuring charges, depreciation expense and stock compensation expense, 2) operating loss before impairment and restructuring charges and 3) selling, general and administrative expense excluding severance expense and costs associated with the settlement of an employee labor relations lawsuit. The following tables provide reconciliation of 1) adjusted EBIDTA to net loss calculated in accordance with GAAP, 2) operating loss before impairment and restructuring charges to operating loss calculated in accordance with GAAP and 3) adjusted selling, general and administrative costs to selling, general and administrative costs calculated in accordance with GAAP. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles in the United States (GAAP). It is provided solely to assist in an investor’s understanding of these items on the comparability of the Company’s operations. A reconciliation of the GAAP amounts to the non-GAAP amounts is shown below.

Adjusted EBITDA:

Operating Loss Excluding Impairment Losses and Restructuring Charges:

Selling, general and administrative (“SG&A”) costs excluding severance expense and legal settlement costs:

Contacts:

INVESTOR RELATIONS CONTACT:
StarTek, Inc.
Julie Patterson
Sr. Director of SEC Reporting
303-262-4587
julie.patterson@startek.com

Source: StarTek, Inc.