srt20190630_10q.htm

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-12793

StarTek, Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-1370538
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	Identification No.)

6200 South Syracuse Way, Suite 485
Greenwood Village, Colorado	80111
(Address of principal executive offices)	(Zip code)

(303) 262-4500

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
	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. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 30, 2021, there were 40,784,673 shares of Common Stock outstanding.

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STARTEK, INC. AND SUBSIDIARIES

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FORM 10-Q

PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	Page
	Consolidated Statements of Income (Loss) and Other Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	4
	Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	6
	Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	7
	Note 1 Overview and Basis of Preparation	8
	Note 2 Summary of Accounting Policies	9
	Note 3 Goodwill and Intangible Assets	12
	Note 4 Revenue	13
	Note 5 Net Gain / (Loss) Per Share	15
	Note 6 Impairment and Restructuring / Exit cost	15
	Note 7 Derivative Instruments	16
	Note 8 Fair Value Measurements	16
	Note 9 Debt	17
	Note 10 Share-Based Compensation	18
	Note 11 Accumulated Other Comprehensive Loss	20
	Note 12 Segment Reporting	21
	Note 13 Leases	22
	Note 14 Investment in Equity-Accounted Investees	25
	Note 15 Subsequent Events	26
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	31
ITEM 4.	Controls and Procedures	31

PART II - OTHER INFORMATION

ITEM 1.	Legal proceeding	32
ITEM 1A.	Risk Factors	32
ITEM 2.	Unregistered sales of equity securities and use of proceeds	32
ITEM 3.	Defaults upon senior securities	32
ITEM 4.	Mine safety disclosure	32
ITEM 5.	Other Information	32
ITEM 6.	Exhibits	33
SIGNATURES		34

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the following:

•

certain statements, including possible or assumed future results of operations, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

•

any statements regarding the prospects for our business or any of our services;

•

any statements preceded by, followed by or that include the words “may,” “will,” “should,” “seeks,” “believes,” “expects,” “anticipates,” “intends,” “continue,” “estimate,” “plans,” “future,” “targets,” “predicts,” “budgeted,” “projections,” “outlooks,” “attempts,” “is scheduled,” or similar expressions; and

•

other statements regarding matters that are not historical facts.

Our business and results of operations are subject to risks and uncertainties, many of which are beyond our ability to control or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by forward-looking statements, and investors are cautioned not to place undue reliance on such statements, which speak only as of the date thereof. Important factors that could cause actual results to differ materially from our expectations and may adversely affect our business and results of operations, include, but are not limited to, those items described herein or set forth in the Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission ("SEC") on March 16, 2021 and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. Unless otherwise noted in this report, any description of "us," "we," or "our," refers to StarTek, Inc. ("Startek") and its subsidiaries.

CHANGE IN FILING STATUS

In accordance with the SEC's expanded definition of Smaller Reporting Companies effective September 10, 2018, Startek qualifies for Smaller Reporting Company status. As such, it has decided to take advantage of the relief provided from Part 1, Item 3.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

	*Three Months Ended March 31,*
	*2021*			*2020*
Revenue		163,495			161,177
Warrant contra revenue		(425	)		(278	)
Net Revenue	$	163,070		$	160,899
Cost of services		(138,383	)		(140,841	)
Gross profit	$	24,687		$	20,058

Selling, general and administrative expenses		(14,171	)		(17,255	)
Impairment losses and restructuring/exit cost		(1,898	)		(24,322	)
Operating income / (loss)	$	8,618		$	(21,519	)

Share of loss of equity-accounted investees		(14	)		(8	)
Interest expense, net		(13,769	)		(3,506	)
Exchange gain / (loss), net		212			1,928
Loss before income taxes	$	(4,953	)	$	(23,105	)
Income tax expense		(4,902	)		(2,876	)
Net loss	$	(9,855	)	$	(25,981	)

Net income / (loss)
Net income attributable to non-controlling interests		2,300			576
Net loss attributable to Startek shareholders		(12,155	)		(26,557	)

Net loss per common share - basic and diluted		(0.30	)		(0.69	)

Weighted average common shares outstanding - basic and diluted		40,592			38,528

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

	*Three Months Ended March 31,*
	*2021*			*2020*
Net loss	$	(9,855	)	$	(25,981	)
Net income attributable to non-controlling interests		2,300			576
Net loss attributable to Startek shareholders		(12,155	)		(26,557	)

Other comprehensive (loss) / income, net of taxes:
Foreign currency translation adjustments		(1,092	)		(4,392	)
Change in fair value of derivative instruments		8			(672	)
Pension amortization		(384	)		396
Other comprehensive loss	$	(1,468	)	$	(4,668	)

Other comprehensive (loss) / income, net of taxes
Other comprehensive (loss) / income attributable to non-controlling interests		(69	)		163
Other comprehensive loss attributable to Startek shareholders		(1,399	)		(4,831	)
	$	(1,468	)	$	(4,668	)
Comprehensive (loss) / income
Comprehensive income attributable to non-controlling interests		2,231			739
Comprehensive loss attributable to Startek shareholders		(13,554	)		(31,388	)
	$	(11,323	)	$	(30,649	)

See Notes to Consolidated Financial Statements.

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STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands, except share data)

(Unaudited)

	*March 31,*			*December 31,*
	*2021*			*2020*
Assets
Current assets
Cash and cash equivalents		57,665			44,507
Restricted cash		6,981			6,052
Trade accounts receivable, net		69,712			83,560
Unbilled revenue		57,530			49,779
Prepaid and other current assets		12,328			14,542
Total current assets	$	204,216		$	198,440

Non-current assets
Property, plant and equipment, net		34,353			34,225
Operating lease right-of-use assets		65,396			69,376
Intangible assets, net		97,879			100,440
Goodwill		183,397			183,397
Investment in equity-accounted investees		25,096			111
Deferred tax assets, net		4,042			5,294
Prepaid expenses and other non-current assets		16,605			13,370
Total non-current assets	$	426,768		$	406,213
Total assets	$	630,984		$	604,653

Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payables		14,457			20,074
Accrued expenses		58,026			57,118
Short term debt		5,230			15,505
Current maturity of long term debt		2,412			2,180
Current maturity of operating lease obligation		18,724			19,327
Other current liabilities		45,130			39,987
Total current liabilities	$	143,979		$	154,191

Non-current liabilities
Long term debt		165,116			118,315
Operating lease liabilities		48,697			52,052
Other non-current liabilities		18,490			15,498
Deferred tax liabilities, net		17,194			17,715
Total non-current liabilities	$	249,497		$	203,580
Total liabilities	$	393,476		$	357,771

Stockholders’ equity:
Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 40,781,804 and 40,453,462 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		408			405
Additional paid-in capital		290,646			288,700
Accumulated deficit		(97,698	)		(85,543	)
Accumulated other comprehensive loss		(8,685	)		(7,286	)
Equity attributable to Startek shareholders	$	184,671		$	196,276
Non-controlling interests		52,837			50,606
Total stockholders’ equity	$	237,508		$	246,882
Total liabilities and stockholders’ equity	$	630,984		$	604,653

See Notes to Consolidated Financial Statements.

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STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

	*Three Months Ended March 31,*
	*2021*	*2020*
Operating Activities

SEC Form 10-Q filed by StarTek, Inc.