(Exact name of registrant as specified in its charter)

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.  ☐

Part I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K originally filed on March 12, 2020 (the “Original Filing”). Except as described above, no changes have been made tocontains forward-looking statements within the Original Filing and this Amendment does not modify, amend, or update in any way anymeaning of Section 27A of the financial or other information contained in the Original FilingSecurities Act of 1933, as amended, and does not reflect events that may have occurred subsequent to the Original Filing. Pursuant to Rules 12b-15 and 13a-14 underSection 21E of the Securities Exchange Act of 1934, as amended, including the following:

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.  All forward-looking statements herein speak only as of the date hereof, and we undertake no obligation to update any such forward-looking statements. 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 set forth in Item 1A. “Risk Factors” appearing in this Amendment containsForm 10-K.

Unless otherwise noted in this report, any description of “us," “we” or "our" refers to Startek, Inc. ("Startek") and its subsidiaries. Financial information in this report is presented in U.S. dollars in thousand unless otherwise stated.

ITEM 1. BUSINESS

BUSINESS OVERVIEW

Startek, Inc. (“Startek”, the Company”, “we”, “our” or “us”) is a global customer experience (CX) solution provider supporting some of the world’s most iconic brands across a variety of markets. Operating under the Startek and Aegis brands, we enable enterprises to create human-centered relationships with their end customers, transform CX and accelerate digital and artificial intelligence (AI) enablement across all their touchpoints and channels. We do this through CX and analytics services, technology-led innovation and engagement solutions, and a complete range of services around the customer life cycle management process (CLM). Our solutions are supported by over 45,000 employees, delivering services from 45 locations in 13 countries on five continents. Each day, our CX experts work together to deliver personalized, meaningful brand-led experiences.
 

The Company was founded in 1987, centered on supply chain management services, including packaging, fulfillment, marketing support, and logistics services. After our initial public offering on June 19, 1997, we increasingly focused on operating customer care contact centers and grew to include our current suite of CX offerings. To remain strategically competitive while expanding our reach with new certificationsand existing clients, we acquired several companies from 2013 to 2015. On July 20, 2018, the Company acquired CSP Alpha Midco Pte Ltd, a Singapore private limited company (Aegis), which resulted in CSP Alpha Holdings Parent Pte Ltd, a Singapore private limited company (Capital Square Partners or CSP) owning a majority of the Company's outstanding shares. Capital Square Partners, a Singapore-based private equity fund, which owned Aegis, is the majority shareholder in the Company, owning approximately 56% of our outstanding shares. The combination greatly improved our competitive position in the market by providing us with access to many of the world’s most rapidly growing markets, offering services in many languages, offering a strong footprint and a foundation of operational excellence capabilities and industry best practices.
 

We offer CX solutions in almost every industry with tailored expertise in the telecoms, e-commerce and  consumer, financial and business services, media and cable, travel and hospitality, technology, education and healthcare, energy and utilities sectors. We serve over 200 clients globally, many of whom are industry leaders in their respective verticals and geographies. We understand the industries in which our clients operate and the unique challenges they face, and we also understand the culture of the business or geography within which our services are delivered. We believe our knowledge of best practices across different industries coupled with an understanding of the solutions that can be implemented in the context of our clients’ operating environments, enables us to improve processes and performance metrics—driving measurable results that differentiate our clients from their competitors. The trust and confidence that our clients have in us are underscored by the long relationships we enjoy with many of our key clients; we have worked with our top five clients for more than nine years on average. We hold the distinction of being a global company with a local flair, one that allows our customers to derive efficiencies in service delivery from onshore, nearshore, and offshore locations. This multi-share capability allows us to craft customized experiences across cultures and continents. 

Service Offerings

Startek offers a broad range of CX, technology, and back-office support solutions that are designed to help our clients gain a competitive advantage by transforming their operations. Our solutions align our clients’ unique requirements by being highly configurable, insight-driven, technology-led, and vertical-specific.
 

Customer Engagement

To stay ahead and stand apart, our clients' businesses need to sell not just a product or service, but a promise. One that is fulfilled by delivering consistent, creative human-centered customer-brand engagements. And we deliver that connection through omnichannel solutions delivered through our tech-enabled and empowered workforce. In the age of the digital consumer, we support customers throughout the entire lifecycle by driving interest, elevating experience, nurturing leads, delivering sales, reducing churn, and growing customer brand affinity with our CX-driven digital engagement services and solutions.
 

Omnichannel Engagement

Today, customers expect to connect immediately, have quick resolutions, and use self-service technologies without any compromise on experience. We help create seamless omnichannel CX and synchronize interactions between a brand and a customer – across channels. When clients want to cultivate and integrate engagement channels, we offer cloud-enabled omnichannel solutions to optimize all opportunities. We also enable clients to integrate diverse self-service technologies that are adaptive and agile in order to make the most of the cultivated leads that their brand spends money and time nurturing.

Social Media

Social media is pervasive in nature and harnessing its energy for business relevance is mandatory. We design and power human-intelligent social media support, technologies, and approaches across multiple channels. Our transformation experts ensure that our clients' social media campaigns and communities are performance-driven, brand-aligned, and nurture loyalty. Our approaches are underpinned by a combination of third-party tools and LISA our proprietary platform that tracks and monitors social conversation threads across numerous niche digital streams and helps clients derive actionable intelligence and opportunities. We work with brands from inception to maturity, as trusted partners, enabling our clients to realize true value by creating experiences and business outcomes that meet their needs and exceed customer expectations.

Customer Intelligence Analytics

A digitally-driven, customer-centric, and data-filled world requires intelligent decision-making. That means leveraging data, next-gen technologies, and capabilities. We consider analytics to be an essential arm of our digital offerings because our clients' businesses are only as competent as the insights that fuel them. We offer cutting-edge data environments, cloud-based platforms, AI-driven technologies, and data scientists who deliver insights. We use analytics to shape relationships, scale businesses, predict behaviors, segment customers and augment CX. This translates consumer insights and big data into initiatives that drive transformation and above-market growth.

Work from Home

Volatile market conditions, shortage of talent, and unprecedented challenges have driven widespread adoption of work from home (WFH) as a desirable operating model. Our approach is unique because it is highly secure, highly compliant, and highly flexible. We leverage a cloud-enabled virtual desktop for our agents with a bring your own device (BYOD) approach. A virtual command center, consisting of functional and business leaders is always on to enable real-time monitoring of business continuity across geographies. Data security is one of our strongest assets, we make use of AI-enabled applications that activate alerts, conduct monitoring, offer facial detection systems, watermark, mask secure content, and more – all to make our clients' businesses more resilient and agile. We retain client confidence with our proven, secure and compliant WFH technologies, deepening our clients’ connection with their customers through digital contactless customer communication.

Startek Cloud

In a rapidly changing world, the cloud empowers novel and flexible operating models. As part of our geo-strategy, accelerated by global shifts, we have moved to the Campus on Cloud framework. Startek Cloud is our next-generation, hybrid, omni-cloud platform. Integrated with AI capabilities, Startek Cloud enables agents to work in remote and home-based roles for increased business agility and continuity. With a foundation based on four pillars - virtual desktop cloud, web-enabled contact center, workforce management, and e-learning - it is a system that serves every real-time requirement, on-demand.

Back Office Services

To help clients enhance their customer-centric view of relationships while maximizing operating efficiencies, we provide finance and accounting services, human resource processing services, data management, and spend management services. These back-office services are designed to help our clients achieve their business objectives by automating repetitive processes and aligning human capital with business goals.

Our Clients

We develop long-term relationships with global corporations and medium-sized enterprises whose business complexities and customer focus require a strategic partner who can quickly and globally scale the tools, technology, and talent needed to design and deliver the desired CX. We provide these services to clients from our delivery campuses across North America, South America, Africa, Asia, Middle East and Australia.

As of December 31, 2021, we have a diverse client base of more than 200 clients across a variety of verticals, including companies that we believe are among the leading players in their respective industries. Approximately 32% of our revenue is derived from clients within the telecommunications industry, which has resulted in a rapidly evolving environment for service providers. Our focus is on the continued diversification of the industries we serve by targeting high-growth verticals such as e-commerce and consumer, financial and business services, healthcare and education, and travel and hospitality. Our revenues for the year ended December 31, 2021, by industries served were as follows:

In the year ending December 2021, our top five and ten clients represented 40% and 55% of total revenue, respectively. Master Service Agreements (MSAs) cover all our work for each client; these MSAs are typically multi-year contracts that may or may not include auto-renewal provisions. Although they typically do not include contractual minimum volumes and are generally terminable by the client without penalty upon prior written notice, our relationships with our top five clients have averaged around nine years, including multiple contract renewals for several of these clients.

Our clients’ CX needs, continue to evolve and expand beyond basic order processing or first-tier calls to handling complex issues that require advanced problem-solving skills, an in-depth understanding of their customers, sourcing the relevant technology capabilities to deliver personalized experiences, and building a highly qualified talent pool for managing CX. Digital outsourcing drivers for enterprises such as access to better technology, analytics, and omnichannel solutions are increasingly becoming more important than traditional outsourcing drivers. Our clients are looking to us to provide them with next-generation technology solutions to enable them to solve key business challenges. We are committed to partnering with our clients to deliver solutions that deliver world-class CX. We are investing in digital solutions and automation technologies that unlock customer insights using state-of-the-art digital technologies.

Key Competitive Differentiators

Our client base is largely comprised of leading global and regional brands. We believe our international footprint, world-class technology, and human capital solutions powered by Startek Cloud are ideally suited for these clients. These brands increasingly look to partner with service providers who embrace customer-centricity and proactively suggest innovative solutions to transform their CX operations. We believe we are well-positioned to succeed in this changing landscape and are differentiated by our insights and analytics, technology-led innovation, and customizable engagement solutions. Additionally, we believe our innovative human capital strategies and operational best practices are key competitive advantages. The successful execution of our principal corporate strategies depends on our competitive strengths, which are briefly described below:

Scale and Global Footprint

We are a truly global business with global clients, global management teams, global best practices, and global thinking. Our vast footprint provides clients with access to some of the world’s most rapidly growing markets, multilingual offerings, and the institution of operational best practices across the globe. Our scale, breadth, and capabilities also support clients with global business requirements by providing engagement services in the country or in geographical proximity based on their CX needs.

Customer Experience and Design

Our human-assisted digital approaches to help us define and build differentiated CX every step of the way in order to build brand loyalty and lifetime value. Our anytime-anywhere approach is based on knowing that customer or user experience is the basis of all decision-making. We design and deliver CX solutions through an integrated omnichannel customer contact management offering. Our primary focus is enabling brands to devise contact strategies that maximize the benefits of each channel, reducing customer effort and increasing ease of use.

Customer Lifecycle Management

Understanding the lifetime view of the client or customer is key in obtaining enhanced value. From initial lead to building long-term brand loyalty, we enable our clients to extend and foster healthier, holistic relationships with their customers not as a one-time option but as an ongoing process and relationship. We offer cradle-to-grave multilingual solutions across the customer life cycle and fulfillment across digitally enabled multilingual channels. From data-driven insights, attracting and retaining customers to converting sales, we help clients tailor personalized 1-2-1 services.

Process Innovation and Optimization

We free our clients from the burden of repetitive, mundane processes that take up time and effort. We assist them with change management and lead them to streamlined, global processes that drive them to the next level of maturity. We use global best practices, tools and methodologies to automate their business process, and, above all, deliver quality assurance.

Technological Excellence: a Serious Approach to Digital

We believe that Startek provides clients with unmatched infrastructure stability. We utilize a combination of industry best practices, internally developed tools, and a globally distributed team of engineers and support staff to centralize and standardize our worldwide delivery capabilities. This architecture enables us to deliver improved scalability and quality of delivery for our clients while lowering capital requirements and information technology operating costs. Our self-healing network, unique to the industry, also enables us to deliver every customer contact cleanly and with minimal downtime. Through automation and machine learning, we seamlessly identify faults in third-party applications and route around or drive repair. The stability of our infrastructure allows us to provide seamless contact delivery while also focusing on developing and delivering new, innovative offerings, including chatbots, AI, and neurolinguistic programming. Our IT solutions are not only technologically sound they also embody the principles of human communication science to ensure a better interactive experience for our client's customers.

Operational Excellence

Our operating platform provides the core processes that allow us to be consistent in our service offering across sites and geographies. It includes execution and innovation in every area of the operation including on-boarding and enabling employees, executing against goals, evaluating, and improving performance, and enhancing the total experience of our clients’ customers.

Human Capital

We have more than 30 years experience managing global talent and offer a consistent, scalable, and flexible workforce that is passionate about delivering the desired CX while meeting or exceeding our clients’ key business objectives. We consistently invest in forward-thinking strategies to attract, develop, reward, and retain top talent across our global enterprise. Our talent management processes are based on the latest strategies in the field of human capital management and are designed to create a progressive workplace where employees thrive in a culture of empowerment, inclusion, and diversity. We place a high emphasis on diversity and inclusivity – using our award-winning six-dimensional framework which helps us hire top talent from new sources, with the added bonus of superior performance, reduced turnover, and sustained levels of engagement.

We recognize our employees as the core of our success and provide them with learning opportunities, multicultural exposure, international work opportunities, and multiple career paths. As of December 31, 2021, we employ approximately 45,000 employees in 13 countries on five continents. Approximately 95% of our employees are located outside the U.S. Approximately 7% of our employees were members of a labor union or were covered by collective bargaining agreements, most of which are mandated under national labor laws outside the U.S. These agreements are subject to periodic renegotiations, and we anticipate that they will be renewed in the ordinary course of business without material impact to our business or in a manner materially different from other companies covered by such industry-wide agreements. We consider our employee relations to be good.

Strategy

We are committed to being the premier, high-performance partner for the world’s leading brands while generating profitable growth for our investors. Our merger with Aegis enables our clients to benefit from the wider global reach and access new markets, access greater multilingual offerings, and leverage new digital solutions. We believe that the foundation for our success is strong and we continue to realize synergies, revenue growth, and operating efficiencies from the combination. To that end, we plan to continue:

Driving a superior CX for our clients is at the center of everything we do. Our agents are on the front lines every day working to build and maintain strong customer relationships that drive sales, satisfaction, and loyalty for our client's brands. To help us accelerate revenue growth across the globe, we will continue to invest in our core CX solutions, including strengthening our consulting and analytics capabilities, technology-enabled platforms, and embedding findings from research in human communication science.

Seasonality

Our business can be seasonal depending on our clients' marketing programs and product launches. These are often geared toward the end of summer and the winter holiday buying season in the U.S. and during major local festival seasons across our other geographies.

Industry

The worldwide customer management business process outsourcing (CM BPO) market is projected to grow steadily at slightly above 4% compounded annual growth rate (CAGR) through 2023, according to industry research firms. By the end of 2023, it is estimated that the CM BPO industry will achieve a total market size of around $240 billion. Approximately 52% of worldwide BPO spend comes from the Americas region, while the Asia-Pacific region has the strongest growth (around 5% CAGR). Evolving buyer expectations to deliver next-generation CX will continue to fuel growth as brands increasingly turn to service providers to support their ongoing efforts for digital transformation.

The industry is also evolving to include key strategic elements beyond traditional contact centers and now includes CX consulting and digital CX services. Despite ongoing market consolidation through multiple mergers and acquisitions, this expanded scope of services driven by the digital CX needs of enterprises is likely to increase the market attractiveness for not only incumbent players but also for new providers with differentiated digital CX capabilities, according to industry research firm Everest Group.

Competition

The global contact center outsourcing market in which we operate is competitive. While many companies provide customer engagement solutions and services, we believe no single company is dominant in the industry. The industry itself continues to consolidate but remains very fragmented with the five largest competitors combined capturing less than 20% of the global market.

Our competitors vary by geography and business segment, and range from large, multinational corporations to smaller, narrowly focused enterprises. Across our lines of business, the principal competitive factors include client relationships, technology, and process innovation, integrated solutions, operational performance and efficiencies, pricing, and financial strength. We primarily compete with in-house customer management operations and other companies that provide CX management, including Alorica, Concentrix, Sitel Group, Sykes, TTEC, Teleperformance, and Transcom, among others. We also compete with smaller, specialized companies and divisions of multinational companies such as Accenture, Conduent, Infosys, Tech Mahindra, and Wipro, among others.

Many of these competitors are significantly larger than Startek in revenue, income, number of contact centers and customer service agents, number of product offerings, and market capitalization. We believe that while Startek is smaller than many of our competitors, we can compete because of our focus, scale, and ability to add value to our clients' businesses. Clients often select Startek to challenge these large competitors, because they want more innovation, flexibility, and speed to market.

Government and Environmental Regulation

We are subject to numerous federal, state, and local laws in the countries, states, and territories in which we operate, including tax, employment, environmental and other laws that govern the way we conduct our business. There are risks inherent in conducting business internationally, including significant changes in domestic government programs, policies, regulatory requirements, and taxation with respect to foreign operations; unexpected changes in foreign government programs, policies, regulatory requirements, and labor laws; and difficulties in staffing and effectively managing foreign operations.

CORPORATE INFORMATION

Our principal executive offices are located at 6200 South Syracuse Way, Suite 485, Greenwood Village, Colorado. Our telephone number is (303) 262-4500. Our website address is www.startek.com. Our stock currently trades on the New York Stock Exchange (NYSE) under the symbol SRT. Our global executives are spread around the world and ensure that we have the right leadership near the moment of truth.

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 30213(a) and 15(d) of the Sarbanes-OxleySecurities Exchange Act of 2002,1934 (the Exchange Act) are available free of charge through our website (www.startek.com) as soon as practicable after we furnish it to the Securities and Exchange Commission (SEC). We also make available on the Investor Relations page of our corporate website, the charters for the Compensation Committee, Audit Committee and Governance and Nominating Committee of our Board of Directors, as well as our Corporate Governance Guidelines and our Code of Ethics and Business Conduct.

None of the information on our website or any other website identified herein is part of this report. All website addresses in this report are intended to be inactive textual references only.

ITEM 1A.  RISK FACTORS

Market and Client Related Risks

A substantial portion of our revenue is generated by a limited number of clients. The loss or reduction in business from any of these clients would adversely affect our business and the results of operations.

Our five largest clients together accounted for 40% of our revenue; our top client accounted for 18% of our total net revenues for the year ended December 31, 2021. Any loss of business from any major client could reduce our revenue and significantly harm our business.

We may not be able to retain our principal clients. If we were to lose any of our principal clients, we may not be able to replace the revenue on a timely basis. Several factors other than our performance could cause the loss of a client or reduction of business from a client. In certain cases, our business may be impacted when a large client changes its outsourcing strategy by moving more work in-house. Reduced outsourcing spending in response to a challenging economic or competitive environment may also result in our loss of a client.

The future revenue we generate from our principal clients may decline or grow at a slower rate than expected or than it has in the past. In the event we lose any of our principal clients or do not receive call volumes anticipated from these clients, we may suffer from the costs of underutilized capacity because of our inability to eliminate all the costs associated with conducting business with that client. This could exacerbate the effect that the loss of a principal client would have on our operating results and financial condition. Additional, productivity gains could be necessary to offset the negative impact that lower per-minute revenue at higher volume levels would have on our margins in future periods.

We depend on several large clients concentrated in a few industries, as well as clients located in a few geographies. Economic slowdown or factors that affect these industries could reduce our revenues and harm our business.

A substantial portion of our clients is concentrated in the telecommunication industry. During the year ended December 31, 2021, we derived 32% of our total revenues from the telecommunication industry. We expect to continue to experience volatility with regard to call volumes with our telecoms clients in 2022. The shift in client demand from customer voice experience solutions toward digital CX solutions may increase as digital solutions become more effective at resolving customers’ needs. This may lower the demand for our services or impact the prices that we can obtain for our services and consequently, adversely affect our revenues and profitability. A reduction in the amount of business we receive from our clients could also result in stranded capacity and costs and adversely affect our business, results of operations, and financial condition.

Economic slowdowns in some markets, particularly the U.S., Saudi Arabia, India, Australia, South Africa, Malaysia, and Argentina may cause reductions in spending by our clients. This may impede our ability to maintain existing business, or develop new business, and adversely impact the results of our operations and our financial condition. Three factors could result in a decrease in the demand for our services and adversely affect our results of operations. They are a downturn in any of our targeted industries, particularly telecoms, banking and financial services, travel and leisure industries, a slowdown or reversal of the trend to offshore business process outsourcing in any of these industries, or the introduction of regulation that restricts or discourages companies from outsourcing.

Client consolidation could result in a loss of business that would adversely affect our operating results.

The telecommunications industry has had a significant level of consolidation. We cannot assure that additional consolidations will not occur in which our clients acquire additional businesses or are acquired themselves. Such consolidations may decrease our business volume and revenue, which could have an adverse effect on our business, results of operations, and financial condition.

Our contracts generally do not contain minimum purchase requirements and can generally be terminated by our customers on short notice without penalty.

We enter into written agreements with each client for our services and seek to sign multi-year contracts. However, these contracts generally permit termination upon 30 to 90 days' notice by our clients; they do not designate us as our clients' exclusive outsourced services provider, do not penalize our clients for early termination, hold us responsible for work performed that does not meet predefined specifications, and do not contain minimum purchase requirements or volume commitments. Accordingly, we face the risk that our clients may cancel or renegotiate contracts we have with them, which may adversely affect our results. If a principal client canceled or did not renew their contract with us, our results would suffer. In addition, because the amount of revenue generated from any client is generally dependent on the volume and activity of our clients' customers, as described above, our business depends in part on the success of our client's products. The number of customers who are attracted to the products of our clients may not be sufficient or our clients may not continue to develop new products that will require our services, in which case it may be more likely for our clients to terminate their contracts with us. Clients can generally reduce the volume of services they outsource to us without any penalties, which would have an adverse effect on our revenue, results of operations and overall financial condition.

Our strategy depends on companies continuing to outsource non-core services.

Some of our clients have been decreasing the number of firms they rely on to provide outsourced services. Due to financial uncertainties and the potential reduction in demand for our client's products and services, our clients and prospective clients may decide to further consolidate the number of firms on which they rely for outsourced services. Under these circumstances, our clients may cancel current contracts with us, or we may fail to attract new clients, which will adversely affect our financial condition.

Intense competition in the market for outsourcing services could affect our win rates and pricing, which could reduce our share of business from clients and decrease our revenues and/or our profits.

Our revenues and profits depend, in part, upon the continued demand for our services by our existing and new clients and our ability to meet this demand in a competitive and cost-effective manner. The outsourcing services market is highly competitive. Our competitors include large global outsourcing and technology firms, regional outsourcing services firms, software and solution providers, niche service providers, and in-house customer support services departments of large corporations.

The outsourcing services industry is experiencing rapid changes that are affecting the competitive landscape, including recent divestitures and acquisitions that have resulted in consolidation within the industry. These changes may result in larger competitors with significant resources or competitors with more competitive service offerings in emerging areas of demand, such as digital solutions, cloud-based solutions, and AI-based solutions. In addition, some of our competitors have added offshore capabilities to their service offerings. These competitors may be able to offer their services using offshore and onsite models more efficiently. In addition, many of these competitors are substantially larger than us and have more diversified infrastructure and contact center locations than Startek. We may face competition in countries where we currently operate, as well as in countries in which we expect to expand our operations. Many of our competitors have significantly greater financial, technical, and marketing resources, generate greater revenues, have more extensive existing client relationships and technology partnerships, and have greater brand recognition than Startek. We may be unable to compete successfully against these competitors or may lose clients to these competitors.

Additionally, our ability to compete effectively also depends in part on factors outside our control, such as the price at which our competitors offer comparable services, and the extent of our competitors’ responsiveness to their clients’ needs. Moreover, our ability to maintain or increase pricing is restricted as clients often expect that as we do more business with them, they will receive volume discounts or lower rates. In addition, existing and new customers are also increasingly using third-party consultants with broad market knowledge to assist them in negotiating contractual terms. Any inability to maintain or increase the pricing on account of this practice may also adversely impact our revenues, gross profits, operating margins, and results of operations.

Risks Arising From the Investments We Make in Anticipation of and To Maintain Our Growth

Our business relies heavily on technology and computer systems, which subjects us to various uncertainties, damage, or disruptions within or beyond our control

We have invested in sophisticated and specialized telecoms and computer technology and have focused on the application of this technology to meet our clients' needs. We anticipate that it will be necessary to continue to invest in and develop new and enhanced technology on a timely basis to maintain our competitiveness. There can be no assurance that any of our information systems will be adequate to meet our future needs or that we will be able to incorporate new technology to enhance and develop our existing services. There can be no assurance that any technology or computer system will not encounter outages or disruptions. Any significant failure, damage, or destruction of our equipment or systems or any major disruptions to basic infrastructures, such as power and telecoms systems in the locations in which we operate, could impede our ability to provide services to our clients and thus adversely affect their businesses, have a negative impact on our reputation and may cause us to incur substantial additional expenses to repair or replace damaged equipment or facilities. Our future success will also depend in part on our ability to anticipate and develop information technology solutions, controls, and processes that keep pace with evolving industry standards, changing client demands, and increasing risks.

Our business will be adversely affected if we fail to enhance existing services or anticipate and develop new services and effectively manage the rapid changes in the use of technology.

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The outsourcing and technology services market is characterized by rapid technological change leading to automation of services, evolving industry standards, changing client preferences, and new product and service introductions. Our future success will depend on our ability to anticipate these advances and develop new service offerings to meet client needs. We may fail to anticipate or respond to these advances on a timely basis, or, if we do respond, the services or technologies that we develop may not be successful in the marketplace and may need significant investments. We are working to develop several new solutions involving AI-based automation, robotic process automation, social media, analytics and other technologies both in-house and in partnership with smaller companies that have developed niche expertise in these technologies. The complexity of these solutions, our inexperience in developing or implementing them, and significant competition in the markets for these solutions may affect our ability to market these solutions successfully. In addition, the development of some services and technologies may involve significant upfront investments and the failure of these services and technologies may result in our inability to recoup some or all these investments. Further, better or more competitively priced products, services, or technologies that are developed by our competitors may render our services non-competitive or obsolete.

Our operating results may be adversely affected if we are unable to maximize our facility capacity utilization.

Our profitability is influenced by our facility capacity utilization. The majority of our business involves technical support and customer care services initiated by our client's customers. As a result, our capacity utilization varies, and demands on our capacity are, to some degree, beyond our control. We continuously anticipate and forecast business growth and infrastructure requirements and may invest in new facilities with or without contracted business for such facilities. We have experienced, and in the future may experience, periods of idle capacity following the opening of new facilities where forecasted volume levels do not materialize. In addition, we have experienced, and in the future may experience, idle peak period capacity when we open a new facility or terminate or complete a large client program. These periods of idle capacity may be exacerbated if we expand our facilities or open new facilities in anticipation of new client business because we generally cannot to require a client to enter a long-term contract or to require clients to reimburse us for capacity expansion costs if they terminate their relationship with us or do not provide us with anticipated service volumes.

We assess the expected long-term capacity utilization of our facilities and may consolidate or close underperforming facilities to maintain or improve targeted utilization and margins. We may incur impairment losses and restructuring charges in future years as a result of closing facilities. There can be no assurance that we will be able to achieve or maintain optimal facility capacity utilization.

If client demand declines due to economic conditions or otherwise, we may not be able to leverage our fixed costs as effectively, which would have a material adverse effect on our results of operations and financial condition.

Adverse changes to our relationships with the companies with whom we have an alliance or joint venture or in the business of the companies with whom we have an alliance or joint venture could adversely affect our results of operations.

We have a joint venture with a large telecom operator in the Kingdom of Saudi Arabia. The priorities and objectives of the joint venture partner may differ from ours. In addition, the joint venture partner is the largest client of the joint venture entity. An adverse economic environment leading to adverse conditions at the joint venture partner’s business could lead to lower volumes for us and may adversely affect our results of operations. Any renegotiation in the terms of the joint venture agreement that is detrimental to us relative to the current shareholder agreement between the joint venture parties could also have an adverse impact on our financials. Termination of the contract with the joint venture partner entity could significantly hamper our operations in the Kingdom of Saudi Arabia and would have a significant adverse impact on the consolidated results of our operations.

Goodwill that we carry on our balance sheet could be subjected to significant impairment charges in the future.

We have and may incur material restructuring charges in the future.

We continually evaluate ways to reduce our operating expenses and adapt to changing industry and market conditions through new restructuring opportunities, including more effective utilization of our assets, workforce, and operating facilities. We have recorded restructuring charges in the past related to involuntary employee terminations, facility closures, and other restructuring activities. We may incur material restructuring charges in the future. The risk that we incur material restructuring charges may be heightened during economic downturns, if clients’ demand, preferences, or expectations change rapidly or with expanded global operations.

Operations Related Risks

Failure to attract and retain key management personnel may adversely impact our strategy execution and financial results.

Our ability to attract, successfully integrate, and retain key management personnel could have a significant impact on our ability to compete or to execute our business strategy. Changes in key management personnel may temporarily disrupt our operations as the new management becomes familiar with our business. Accordingly, our future financial performance will depend to a significant extent on our ability to attract, motivate, train, and retain key management personnel.

If we are not able to hire and retain qualified employees, our ability to service our existing customers and retain new customers will be adversely affected.

Our success is largely dependent on our ability to recruit, hire, train and retain qualified employees. Our business is people-intensive and, as is typical for our industry, continues to experience high employee turnover. Our operations, especially our technical support and customer care services, generally require specially trained employees, which, in turn, requires significant recruiting and training costs. Such turnover adversely affects our operating efficiency, productivity, and ability to fully respond to client demand, adversely impacting our operating results. Some of this turnover can be attributed to the fact that we compete for labor not only with other call centers but also with other similar-paying jobs, including retail, services industries, food service, etc.  As such, improvements in the local economies in which we operate can adversely affect our ability to recruit agents in those locations. Further increases in employee turnover or failure to effectively manage these high attrition rates would have an adverse effect on our results of operations and financial condition.

The addition of new clients or implementation of new projects for existing clients may require us to recruit, hire, and train personnel at accelerated rates. We may not be able to successfully recruit, hire, train, and retain sufficient qualified personnel to adequately staff for an existing business or future growth, particularly if we undertake new client relationships in industries in which we have not previously provided services. Because a substantial portion of our operating expenses consists of labor-related costs, labor shortages or increases in wages (including minimum wages as mandated by the federal governments, employee benefit costs, employment tax rates, and other labor-related expenses) could cause our business, operating profits, and financial condition to suffer. Economic and legislative changes in the U.S. may encourage organizing efforts in the future which, if successful, could further increase our recruiting and training costs and could decrease our operating efficiency and productivity.

Our operating costs may increase as a result of higher employee costs or an increase in minimum wages.

We have sought to contain our employee costs by limiting salary increases and payment of cash bonuses to our employees. The local economies in some of the locations in which we operate may experience growth, which causes pressure on employee rates to remain competitive within the local economies. If these growth trends continue, we may need to further increase salaries or otherwise compensate our employees at higher levels to remain competitive. Higher salaries or other forms of compensation are likely to increase our cost of operations. If such increases are not offset by increased revenue, they will negatively impact our financial results.

Wage costs in offshore delivery locations such as India and the Philippines have historically been significantly lower than wage costs in the U.S. for comparably skilled professionals, which has been one of our competitive strengths. Offshore outsourcing is a politically sensitive topic in the U.S. and elsewhere. There has been increased expression of concern by many organizations and public figures about a perceived association between offshore outsourcing providers and the loss of jobs in their home countries. Recently there has been an indication that immigration regulations in the U.S. could undergo significant changes that may require us to substitute offshoring with local hires in the U.S. Such hiring could result in overall increased wage costs thereby impacting profitability.

Additionally, wage increases in India may prevent us from sustaining this competitive advantage and may negatively affect our profit margins. We have historically experienced significant competition for employees from large multinational companies that have established and continue to establish offshore operations in India, as well as from companies within India. This competition has led to wage pressures in attracting and retaining employees, and these wage pressures have led to a situation where wages in India are increasing at a faster rate than in the U.S.

Employee strikes, collective bargaining agreements, and other employee-related disruptions may adversely affect our operations.

In certain geographies, like Argentina, our workforce is part of collective bargaining agreements that require us to negotiate wage hikes with labor unions. Our inability to negotiate wage hikes favorable for Startek or our inability to pass 100 percent of these wage hikes completely to our customers in the form of increased pricing will adversely impact our profitability and operating margins. In the past, some of our employees in other geographies have attempted to organize a labor union, and economic and legislative changes may encourage organizing efforts in the future, which, if successful, could further increase our recruiting and training costs and could decrease our operating efficiency and productivity. We cannot assure that there will not be any strike, lockout or material labor dispute in the future. Work interruptions or stoppages could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

We are also a party to various labor disputes and potential disputes. If our provisions for any of our labor claims are insufficient or the claims against us rise significantly in the future, this could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our financial condition and results of operations for 2022 could get adversely affected by health pandemics such as the recent Coronavirus or COVID-19 outbreak.

Our business could be materially and adversely affected by health pandemics, including, but not limited to, outbreaks of the coronavirus or COVID-19. Outbreaks of COVID-19 have alarmed people around the world, affecting economic activity globally. More recently, cases of the COVID-19 virus have been identified internationally, including confirmed human outbreaks and deaths. Any prolonged pandemic such as COVID-19, or other contagious infection in the countries in which we do business may result in employee absences, lower asset utilization rates, voluntary closure of our offices and delivery centers, travel restrictions on our employees, and other disruptions to our business. Moreover, health epidemics may force local health and government authorities to mandate the closure of our offices and delivery centers. Any prolonged or widespread health pandemic could severely disrupt our business operations, resulting in a significant decrease in demand for our services and have a material adverse effect on our financial condition, results of operations, and cash flows.

Increases in the cost of telephone and data services or significant interruptions in such services could adversely affect our business.

We depend on telephone and data services provided by various local and long-distance telephone companies. Because of this dependence, any change to the telecoms market that would disrupt these services or limit our ability to obtain services at favorable rates could affect our business. For example, the concentration and bargaining power of technology and telecoms suppliers, most of which are filed herewith,beyond our control or which we cannot predict, could increase the cost of telecommunication services. We have taken steps to mitigate our exposure to the risks associated with rate fluctuations and service disruption by entering long-term contracts with various providers for telephone and data services and by investing in redundant circuits. There is no obligation, however, for the vendors to renew their contracts with us or to offer the same or lower rates in the future and such contracts are subject to termination or modification for various reasons outside of our control.

In addition, there is no assurance that a redundant circuit would not also be disrupted. A significant increase in the cost of telephone services that are not recoverable through an increase in the price of our services or any significant interruption in telephone services could adversely affect our business.

Our foreign operations subject us to the risk of currency exchange fluctuations.

Although most of our revenue and costs are in the local currency of the geography we operate in, we do run a currency risk because we deliver a portion of our business in an offshore location relative to the location of our clients. In such offshore deals, in certain geographies revenue is generated in U.S. dollars but operating costs are paid in local currencies. Thus, we are exposed to market risk from changes in the value of these currencies to the U.S. dollar. We engage in hedging activities relating to our exposure to such fluctuations. Our hedging strategy, including our ability to acquire the desired amount of hedge contracts, may not sufficiently protect us from strengthening or weakening these currencies against the U.S. dollar.

Some of the countries we have a presence in have experienced inflation and volatility in the past and some Latin American countries, such as Argentina, have recently been classified as hyperinflationary economies. While inflation may not have a significant effect on the profit and loss of a local subsidiary itself, depreciation of the local currency against the U.S. dollar would reduce the value of the dividends payable to us from our operating companies. We report our financial results in U.S. dollars and our results of operations would be adversely affected if these local currencies depreciate significantly against the U.S. dollar, which may also affect the comparability of our financial results from period to period, as we convert our subsidiaries’ statements of financial position into U.S. dollars from local currencies at the period end exchange rate and income and cash flow statements at average exchange rates for the year.

We may incur losses due to unanticipated or significant intra-quarter movements in currency markets which could have an adverse impact on our profit margin and results of operations. Also, the volatility in the foreign currency markets may make it difficult to hedge our foreign currency exposures effectively.

Changes in tax laws in the geographies we operate in could have an adverse impact on our financial results.

We are subject to tax audits, including with respect to transfer pricing, in the U.S. and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations, and financial condition. We continuously review the potential impacts of the recent changes; however, we cannot predict any future tax law changes which could have an impact on our future tax liabilities.

The governments of jurisdictions where we have a presence could enact new tax legislation which would have a material adverse effect on our business, results of operations, and financial condition. In addition, our ability to repatriate surplus earnings from our delivery centers in a tax-efficient manner is dependent upon interpretations of local laws, possible changes in such laws, and the renegotiation of existing double tax avoidance treaties. Changes to any of these may adversely affect our overall tax rate, or the cost of our services to our clients, which would have a material adverse effect on our business, results of operations, and financial condition.

We are subject to transfer pricing and other tax-related regulations and any determination that we have failed to comply with them could materially adversely affect our profitability.

Transfer pricing regulations to which we are subject require that any international transaction among our company and its subsidiaries be on arm’s length terms. We believe that the international transactions among the Startek group companies are on arm’s length terms. If, however, the applicable tax authorities determine that the transactions among the Startek group companies do not meet arm’s length criteria, we may incur an increased tax liability, including accrued interest and penalties. This would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows.

Our existing debt may affect our flexibility in operating and developing our business and our ability to satisfy our obligations.

As of December 31, 2021, we had total indebtedness of $170 million. Our level of indebtedness may have significant negative effects on our future operations, including:

If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. We can provide no assurance that any such refinancing would be possible or that any additional financing could be obtained. Our inability to obtain such refinancing or financing may have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our financing agreements impose debt covenants which are to be fulfilled by the Company and/or its subsidiaries failing which may have detrimental impact on the potential growth and results of operations.

Our secured revolving credit facility and the senior term loan facility agreement entered by our subsidiaries contains certain affirmative and negative covenants that may limit or restrict our ability to engage in certain activities, including but not limited to, making certain investments, limiting capital expenditures, incurring additional indebtedness, and engaging in mergers and acquisitions. If we are not able to meet these covenants, our ability to respond to changes in the business or economic conditions may be limited, and we may be unable to engage in certain activities that otherwise may be beneficial to our business. We cannot assure that we will be able to meet the financial covenants under our credit facility, or that in the event of noncompliance, we will be able to obtain waivers or amendments from our lenders. If we fail to comply with the terms of the agreement, our lender could decide to call any amounts outstanding immediately, and there can be no assurance that we would have adequate resources or collateral to satisfy the demand. Any such scenario would have a material adverse impact on our financial condition.

If we are unable to fund our working capital requirements and new investments, our business, financial condition, results of operations, and prospects could be adversely affected.

The outsourcing industry is characterized by high working capital requirements and the need to make new investments in operating sites and employee resources to meet the requirements of our clients. We incur significant startup costs related to investments in infrastructure to provide our services and the hiring and training of employees, such expenses being historically incurred before revenue is generated.

In addition, we are exposed to adverse changes in our key clients’ payment policies, which could have a material adverse impact on our ability to fund our working capital needs. During the year ended December 31, 2021, our average days' sales outstanding (DSO) was approximately 55 days. If our key clients implement policies that extend the payment terms of our invoices, our working capital levels could be adversely affected and our finance costs may increase. If we are unable to fund our working capital requirements, access financing at competitive prices, or make investments to meet the expanding business of our existing and potential new clients, our business, financial condition, results of operations, and prospects could be adversely affected.

Regulatory and Related Risks

Cyberattacks or the improper disclosure or control of personal information could result in liability and harm our reputation, which could adversely affect our business.

We are dependent on networks and systems to process, transmit and store electronic information and to communicate among our locations around the world and with our alliance partners and clients and we may be required to store sensitive or confidential client data in connection with the services we provide. As a result, we are subject to contractual terms and numerous U.S. and foreign laws and regulations designed to protect this information. Furthermore, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services. Although we have implemented appropriate policies and procedures to reduce the possibility of physical, logical, and personnel security breaches, along with appropriate audit oversight for verifying continued operating effectiveness of the same through internal audits and external SSAE16, HIPAA, GDPR, ISAE 3402, ISO27K1, ISO 14K1, and PCI-DSS reviews, no such measures can completely eliminate the risk of cybersecurity attacks, especially in light of advances in criminal capabilities (including cyber-attacks or cyber intrusions over the internet, malware, computer viruses and the like), the discovery of zero-day vulnerabilities or attempts to exploit existing vulnerabilities in interconnected third party systems that are beyond our control systems.

Unauthorized disclosure, either actual or perceived, of a sensitive or confidential client or customer data, whether through systems failure, system intrusion, employee negligence, fraud, or otherwise could damage our reputation and cause us to lose clients. Similarly, unauthorized access to or through our information systems or those we develop for our clients, whether by our employees or third parties, could result in negative publicity, legal liability, and damage to our reputation, business, financial condition, results of operations, and cash flows.

The Company experienced a cyberattack by a threat actor in 2021. We were able to thwart the attack with minimal damage to us both operationally and financially and were able to realize a substantial part of the liability from our insurance cover. However, there is no assurance that there may not be a material adverse effect in the future. Although we maintain cyber liability insurance, such insurance may not adequately or timely compensate us for all losses we may incur as any of our client contracts do not contain limitations of liability for such losses.

Our foreign operations are subject to social, political, and economic risks that differ from those in the U.S.

We conduct a significant portion of our business and employ a substantial number of people outside of the U.S. During the year ended December 31, 2021, we generated approximately 81% or $569 million of our revenue from operations outside the U.S. Circumstances and developments related to foreign operations that could negatively affect our business, financial condition or results of operations include, but are not limited to, the following factors:

Our global growth (including growth in new regions in the U.S.) also subjects us to certain risks, including risks associated with funding increasing headcount, integrating new offices and establishing effective controls and procedures to regulate the operations of new offices and to monitor compliance with regulations such as the Foreign Corrupt Practices Act and similar laws.

Although we have committed substantial resources to expand our global platform, if we are unable to successfully manage the risks associated with our global business or to adequately manage operational fluctuations, our business, financial condition and results of operations could be harmed.

We process, transmit and store personally identifiable information and unauthorized access to or the unintended release of this information could result in a claim for damage or loss of business and create unfavorable publicity.

We process, transmit and store personally identifiable information, both in our role as a service provider and as an employer. This information may include social security numbers, financial and health information, as well as other personal information. As a result, we are subject to certain contractual terms as well as federal, state and foreign laws and regulations designed to protect personally identifiable information. We take measures to protect against unauthorized access and to comply with these laws and regulations. We use the internet as a mechanism for delivering our services to clients, which may expose us to potential disruptive intrusions. Unauthorized access, system denials of service, or failure to comply with data privacy laws and regulations may subject us to contractual liability and damages, loss of business, damages from individual claimants, fines, penalties, criminal prosecution, and unfavorable publicity, any of which could negatively affect our operating results and financial condition. In addition, third party vendors that we engage to perform services for us may have an unintended release of personally identifiable information.

We are required to comply with laws governing the transmission, security, and privacy of protected health information.

We are required to comply with applicable laws governing the transmission, security, and privacy of health information, including, among others, the standards of The Health Insurance Portability and Accountability Act (HIPAA). Failure to comply with any of these laws could make it difficult to expand our healthcare business process outsourcing business and/or cause us to incur significant liabilities.

The failure to comply with debt collection and consumer credit reporting regulations could subject us to fines and other liabilities, which could harm our reputation and business, and could make it more difficult for us to retain existing customers or attract new customers.

The Fair Debt Collection Practices Act (FDCPA) regulates persons who regularly collect or attempt to collect, directly or indirectly, consumer debts owed or asserted to be owed to another person, which includes our debt collection business. Many states impose additional requirements on debt collection communications and some of those requirements may be more stringent than the federal requirements. In addition, many U.S. states require a debt collector to apply for, be granted, and maintain a license to engage in debt collection activities in a state. We are currently licensed (or exempt from licensing requirements) to provide debt collection services in most U.S. states.  Moreover, regulations governing debt collection are subject to changing interpretations that may be inconsistent among different jurisdictions. We could be subject to fines or other penalties if we are determined to have violated the FDCPA, the Fair Credit Reporting Act, or analogous state laws, which could make it more difficult to retain existing customers or attract new customers and could otherwise harm our business.

Argentina has undergone significant political, social, and economic instability in the past several years. If such instability continues or worsens, our Argentine operations could be materially adversely affected.

During the year ended December 31, 2021, our Argentina operations accounted for 4.6% of our total revenue. Argentina has been facing economic difficulty for the past several years. Since 2015, the Argentine economy has experienced a recession, as well as a political and social crisis, and the significant depreciation of the Argentine peso against major international currencies. Depending on the relative impact of other variables affecting our operations, including technological changes, inflation, gross domestic product (GDP) growth, and regulatory changes, the continued depreciation of the Argentine peso may have a negative impact on our business in Argentina.

The country has been experiencing high inflation in recent years and there can be no assurance that Argentina will not experience another recession, higher inflation, devaluation, unemployment, and social unrest in the future.

In the past, Argentina has been under a severe exchange control system that required government approval for any transfer of funds. Although administrations have taken measures to lift foreign exchange controls there can be no assurance that the Argentine government will not impose new restrictions on the transfer of funds from Argentina to preserve and protect foreign exchange reserves. If we are unable to repatriate funds from Argentina for whatever reason, we will not be able to use the cash flow from our Argentine operations to finance our operating requirements elsewhere or to satisfy our debt obligations.

Market Related Risks

Our largest stockholder can significantly influence corporate actions.

Capital Square Partners (CSP), a Singapore-based private equity fund, is our principal shareholder following the combination of Aegis and the Company. CSP owns approximately 56% of our outstanding stock. The Stockholders Agreement dated July 20, 2018, gives CSP the right to appoint majority directors on our Board of Directors including the Chairman of the Board of Directors. Currently, there are four Directors appointed by CSP, including the Executive Chairman and CEO.

CSP has a continuing ability to exercise significant influence over our affairs for the foreseeable future, including controlling the election of directors and significant corporate transactions, such as a merger or other sale of our Company or our assets. This concentrated control by CSP limits the ability of other shareholders to influence corporate matters and, as a result, we may take actions that our other shareholders do not view as beneficial.

Future equity issuances may dilute the holdings of ordinary shareholders and could materially affect the market price of our ordinary shares.

We may in the future decide to offer additional equity to raise capital or for other purposes. Any such additional offering could reduce the proportionate ownership and voting interests of holders of our ordinary shares, as well as our earnings per ordinary share and net asset value per ordinary share. Future sales of substantial amounts of our ordinary shares in the public market, whether by us or by our existing shareholders, or the perception that sales could occur, may adversely affect the market price of our shares, which could decline significantly.

Our stock price has been volatile and may decline significantly and unexpectedly.

The market price of our common stock has been volatile, and could be subject to wide fluctuations in response to quarterly variations in our operating results, changes in management, the degree of success in implementing our business and growth strategies, announcements of new contracts or contract cancellations, announcements of technological innovations or new products and services by us or our competitors, changes in financial estimates by securities analysts, the perception that significant stockholders may sell or intend to sell their shares or other events or factors we cannot currently foresee. We are also subject to broad market fluctuations, given the overall volatility of the current U.S. and global economies, where the market prices of equity securities of many companies experience substantial price and volume fluctuations that have often been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our common stock. Additionally, because our common stock trades at relatively low volume levels, any change in demand for our stock can be expected to substantially influence market prices thereof.

If Amazon exercises its right to acquire shares of our common stock pursuant to the Warrant, it will dilute the ownership interests of our then-existing stockholders and could adversely affect the market price of our stock.

On January 23, 2018, we entered into a Transaction Agreement (the Amazon Transaction Agreement) with Amazon.com, Inc. (Amazon). Pursuant to which we agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly-owned subsidiary of Amazon, a warrant (the Warrant) to acquire up to 4,000,000 shares of our common stock, subject to certain vesting events. If Amazon exercises its right to acquire shares of our common stock pursuant to the Warrant, it will dilute the ownership interests of our then-existing stockholders and reduce our earnings per share. In addition, any sales in the public market of any common stock issuable upon the exercise of the Warrant by Amazon could adversely affect prevailing market prices of our common stock.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

As of December 31, 2021, we had operating centers in the following countries, containing in the aggregate approximately 2,286 thousand square feet:

All the above facilities are leased except one site in India which is owned by us. Sites that are not currently operating as of December 31, 2021, are not included in the list above.

Substantially all our facility spaces can be used to support any of our business process outsourced services. We believe our existing facilities are adequate for our current operations. We intend to maintain efficient levels of excess capacity to enable us to readily provide for needs of new clients and increasing needs of existing clients.

ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.

Part II

ITEM 5.  MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR COMMON STOCK

Our common stock has been listed on the NYSE under the symbol “SRT” since the effective date of our initial public offering on June 19, 1997.

HOLDERS OF COMMON STOCK

As of March 4, 2022, there were approximately 26 record holders and 40,273,438 shares of common stock outstanding. See Item 1A. “Risk Factors,” set forth in this Form 10-K for a discussion of risks related to control that may be exercised over us by our principal stockholders.

DIVIDEND POLICY

On January 22, 2007, our board of directors announced it would not declare a quarterly dividend on our common stock in the first quarter of 2007 and did not expect to declare dividends in the near future, making the dividend paid in November 2006 the last quarterly dividend that will be paid for the foreseeable future. We plan to invest in growth initiatives and pay down debt in lieu of paying dividends.

STOCK REPURCHASE PROGRAM

Effective November 4, 2004, our board of directors authorized repurchases of up to $25 million of our common stock. The repurchase program will remain in effect until terminated by the board of directors and will allow us to repurchase shares of our common stock from time to time on the open market, in block trades and privately negotiated transactions. Repurchases will be implemented by the Chief Financial Officer consistent with the guidelines adopted by the board of directors and will depend on market conditions and other factors. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. Any repurchases will be made in accordance with SEC rules. 

During the year the Company undertook share repurchases under a previously announced and approved Repurchase Plan. During the year the Company repurchased an aggregate of 412,769 shares of our common stock under our repurchase plan at an average cost of $4.61 per share. 

Share repurchase activity during the year ended December 31, 2021 was as follows:

(1) Excludes broker commission.

ITEM 6.  [RESERVED]

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the accompanying Consolidated Financial Statements included elsewhere in this annual report.

BUSINESS DESCRIPTION AND OVERVIEW

Startek is a leading global provider of technology-enabled customer experience (CX) solutions. The Company provides omnichannel CX, digital transformation, and technology services to some of the world’s leading brands. Startek is committed to impacting clients’ business outcomes by focusing on enhancing CX and digital enablement across all touch points and channels. Startek has more than 45,000 employees located across 45 delivery campuses in 13 countries. The Company services over 200 clients across a range of industries such as banking and financial services, insurance, technology, telecoms, healthcare, travel and hospitality, consumer goods, retail and energy and utilities.

Startek manages over half a billion customer moments of truth each year for the world’s leading brands. We help these brands increase their revenues by enabling better experiences for their customers across multiple channels. As a leading provider of technology-enabled business process management solutions for major global brands—we drive business value through omnichannel CX, digital transformation and technology services.

SIGNIFICANT DEVELOPMENTS

Cyber Security Incident

On June 30, 2021, we suffered an attempted encryption attack. While the attackers or the threat actors failed to shut down company operations, they encrypted some of our operating systems and application servers. We took immediate steps to remedy the situation and, based on the numerous steps undertaken, we believe that the incident is contained and we have eradicated any remnants of the attack. This incident resulted in temporary disruption to our business that was caused by the threat actors encrypting some of our systems and our precautionary actions to move certain of our systems offline. The impact of this incident on our clients was varied and was dependent on the region of our service delivery. Many of our clients faced no disruptions as the network and systems in those regions weren’t compromised, however, in some regions our customers faced disruptions especially where we support work from home operations. In addition, within the impacted clients, many maintained connectivity with our network, allowing us to continue to provide service. However, some clients chose to temporarily suspend our access to their networks as a measure of abundant caution.

Since the incident, we have (a) restored the security of our systems and networks, (b) significantly enhanced the continuous monitoring of our entire information security environment, (c) implemented various enhancements to our network and processes to prevent the recurrence of such incidents, (d) made all required notifications to applicable governmental and regulatory agencies as well as individuals, and, (e) have implemented measures recommended by leading external forensics and cybersecurity experts to thwart such incidents in the future.

The incident had some impact on our revenues and operating income during the year though the impact was not significant. A large part of the costs related directly to the incident has been recovered from our insurance policies. We have taken certain steps to remedy the situation and plan to make incremental investments to enhance the overall security of our information technology environment.

Coronavirus

The global outbreak of the novel coronavirus (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020. The pandemic has negatively impacted the global economy, disrupted global supply chains, created significant volatility and disruption of financial markets resulted in significant travel restrictions, mandated facility closures, and led to shelter-in-place and social distancing orders in numerous jurisdictions around the world. Certain of our customer engagement centers have been impacted by local government actions restricting facility access or are operating at lower capacity utilization levels. During the year, governments began easing COVID-19 restrictions, which contributed to a resurgence of COVID-19 cases and the spread of COVID-19 variants. The availability of vaccines (and vaccine boosters) continues to increase around the world, albeit with slower than anticipated rollouts and challenges in certain countries.  In response to COVID-19, we have prioritized our employees' safety and wellbeing, business continuity for our clients, and supporting the efforts of governments around the world to contain the spread of the virus. In light of our commitment to helping our clients navigate unprecedented business challenges while protecting the safety of our employees, we have taken numerous steps and will continue to take further actions to address the COVID-19 pandemic. We have taken additional measures to ensure the safety of our employees in India who were facing a strong wave of the pandemic. We continue to work closely with our clients to support them as they implemented their contingency plans, helping them access our services and solutions remotely. In discussion with our clients, we continue to maintain many of our employees on a work at home model. The extent of the ultimate impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our operations within the expected parameters, will depend on future developments, including the duration and spread of the pandemic and related actions taken by the various governments to prevent disease spread, all of which remain uncertain and cannot be predicted.

Share Repurchase

During the year, the Company undertook share repurchases under a previously announced and approved Repurchase Plan. During the year, the Company repurchased an aggregate of 412,769 shares of our common stock under our repurchase plan at an average cost of $4.61 per share. The Company believes its liquidity position is strong and shall continue with share repurchases in the near future.

Private Offer

On December 20, 2021, CSP Management Limited (“CSP”), an affiliate of our majority shareholder, submitted a preliminary, non-binding proposal to acquire all of our outstanding shares of common stock that are not already beneficially owned by CSP for $5.40 in cash per share (the “Proposed Transaction”). The board of directors of Startek has formed a special committee of independent directors that is authorized, among other things, to evaluate the non-binding proposal. The principal terms and conditions of the Proposed Transaction will be set forth in definitive agreements to be negotiated by the special committee with CSP. There can be no assurance that any definitive offer will be made or accepted, that any agreement will be executed or that any transaction will be consummated.

Key Matters Pertaining to Subsidiaries

Debt Refinancing

On February 18, 2021, CSP Alpha Holdings Pte. Ltd., a subsidiary of the Company entered into a new facility agreement that provided for a $165 million term loan facility and a $20 million revolving credit facility, in each case with a maturity date 60 months after the date of first utilization of the term loan facility. Amortization of the term loan starts from a date falling in November 2022, i.e., 21 months from the first utilization date of the loan. The term loan facility and the revolving loan facility each bear interest at a rate per annum equal to a LIBOR rate plus an applicable margin of between 3.75% and 4.50%, depending on an adjusted leverage ratio. The Facilities Agreement also contains financial covenants, including cash flow cover, adjusted leverage, and limitations on capital expenditures.

On February 22, 2021, the Company used proceeds from the above facilities agreement to prepay and terminate the existing credit facility made available to it under that certain Amended and Restated Senior Term and Revolving Facilities Agreement, dated October 27, 2017.

Strategic Investment

On February 25, 2021, the Company announced a $25 million strategic minority investment in CSS Corp. (“CSS”), a new-age IT services and technology support solutions company that harnesses the power of AI, automation, analytics, cloud, and digital to address customer needs. Through this investment, Startek acquired an indirect beneficial interest in CSS of approximately 26%, with Capital Square Partners (“CSP” or “CSP Fund”), a Singapore-based Private Equity Fund Manager, and the Company’s majority shareholder, acquiring the majority controlling stake.

The Company and CSP Alpha Holdings Pte. Ltd., a subsidiary of the Company, participated in this transaction by (i) contributing $25 million to acquire approximately 62.5%* in CSS Corp LP, and (ii) paying $5 million to CSP Management Limited to acquire certain call options. These call options to acquire a controlling stake in CSS are only exercisable by the Company during the period from August 19, 2022, to April 19, 2023, without any obligation and are currently considered to be not substantive.

*Subsequently reduced to 61.35%

RESULTS OF OPERATIONS — YEARS ENDED DECEMBER 31, 2021, AND 2020

Revenue

Our gross revenues for the year ended December 31, 2021, increased by 9.6% to $703,546 as compared to $641,844 for the year ended December 31, 2020.

Our net revenue for the years ended December 31, 2021, and 2020:

Our net revenues adjusted for warrant contra revenue for the year ended December 31, 2021, was higher at $703,633 compared to $640,222 for the year ended December 31, 2020.

The breakdown of our net revenues from various industry verticals for years ended December 31, 2021, and 2020 is as follows:

Telecom vertical continues to be the largest vertical with 32% contribution to revenue. Year ended December 31, 2021, saw an increase in absolute revenue in this vertical driven by a large win in an existing client in South Africa and an increase in revenues with our largest telecom client in the USA.

E-commerce and Consumer vertical saw a decline in revenue in 2021 due to volume reduction in a large U.S.-based e-commerce client. This was partially offset by a substantial ramp in other e-commerce and food delivery platform in India. Operations in brick-and-mortar retail and auto clients recovered in 2021 from pandemic-led declines in 2020.

Travel and hospitality vertical continues to face challenges due to the uncertainty created by the new waves of the Pandemic.

Healthcare and Education vertical saw a 32% increase in revenue led by the vaccination program in the second quarter. Financial and Business services vertical saw a sharp recovery to pre-pandemic levels.

The breakdown of our net revenues from various segments for years ended December 31, 2021, and 2020 is as follows:

Revenue in the Americas declined slightly due to softness in travel and hospitality vertical that was partly offset by the one time revenue in the healthcare vertical related to the covid vaccination program.

Revenue growth in 2021 in India and Sri Lanka was driven by increased volumes and new business wins across the board as these geographies started opening up after strict lockdowns imposed in 2020. The Company grew with clients in the ecommerce, food delivery platform and business services verticals.

Revenue in Malaysia remain flat year on year due to movement of some lines of business with an existing client to India.

Our operation in the Middle East delivered strong revenue growth at the back of wining new logos in the government sector. The concentration on a select clients in this regions has been on a declining trend as we broad base our client portfolio in the region.

Revenue in Argentina was lower due to movement in foreign currency. However, the Argentine Peso was less volatile in 2021 relative to previous years.

Our revenue in the Rest of World was higher in 2021 driven by higher volume in South Africa led by the long term contract renewal with a telecom client where we won 100% of their wallet displacing competition.

Cost of Services and Gross Profit

Overall, cost of services as a percentage of revenue marginally decreased to 86.1% for the year ended December 31, 2021, as compared to 86.4% for the year ended December 31, 2020. Employee expenses, rent costs, and depreciation and amortization are the most significant costs for the Company, representing 75.8%, 4.8%, and 4.2% of total cost of services, respectively. The breakdown of cost of services is listed in the table below:

Employee expenses: Our business heavily relies on our employees to provide professional services to our clients. Thus, our most significant costs are payments made to agents, supervisors, and trainers who are directly involved in delivering services to the clients.

Employee expenses as a percentage of revenues increased to 65.3% for the current year as compared to 64.9% for the previous year. The increase in percentage in the current year is reflective of higher onshore revenue in the current year relative to the previous year. This was led by the vaccination program in U.S. in the second quarter of the current year.

Rent expense: Rent expense as a percentage of revenue decreased to 4.1% for the current year as compared to 4.9% for the previous year. This is due to a higher revenue base in the current year that was delivered from the existing sites and from home.

Depreciation and amortization: Depreciation and amortization expense as a percentage of revenue for the current year was marginally lower at 3.6% as compared to 3.9% for the previous year.

Other expense includes technology, utility, travel, and outsourcing costs. As a percentage of revenue, these costs marginally increased from 12.7% to 13.1%. The increase was driven by recruitment costs to hire temporary employees to fulfill the vaccination program this year. There was a marginal increase in insurance costs as well. These increases in costs were partially offset by the decrease in utilities and maintenance costs since a large proportion of employees continued to work from home during the current year.

As a result, gross profit as a percentage of revenue for the current year marginally increased to 13.9% as compared to 13.6% for the previous year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) as a percentage of revenue decreased from 9.3% in the previous year to 7.8% in the current year. The decrease was driven by a higher revenue base and lower communication and maintenance expenses.

Impairment Losses and Restructuring Charges, Net

Impairment losses and restructuring costs, net totaled $8,226 for the current year as compared to $37,799 for the previous year. The expense for the current year primarily relates to right-of-use assets impairment charge of $4,514 and restructuring expenses of $3,712. As of December 31, 2021, based on the qualitative and quantitative assessment, we concluded that there is no impairment of goodwill. The Company recognized an impairment charge of $4,514 on right-of-use assets related to operating leases in a few geographies. Given the increasing adoption of the work from home delivery model, we are continuously evaluating our brick-and-mortar infrastructure with a view of rationalizing excess capacity. The Company does not contain new certifications under Section 906plan to use such sites for 'on premise' operations and as per the existing contractual terms of the Sarbanes-Oxley Actlease agreement the Company does not have the right to stop making lease payments for the remaining lease terms or to sublease such premises. The remaining lease term for such sites as on December 31, 2021 ranges from 12-24 months.

Interest Expense, Net
 

Interest expense, net totaled $19,173 for the current year as compared to $13,376 for the previous year. Higher interest expense during the current year is due to the upfront cost of 2002debt refinancing concluded in February 2021.

Income Tax Expense (Benefit)

Income tax expense for the current period was $11,866 compared to $7,760 for the previous period. The movement in the implied effective tax rate was primarily due to shifts in earnings among the various jurisdictions in which we operate coupled with utilization of net operating losses for entities having taxable profit and valuation allowance as per the requirement of ASC 740. The tax expense during the current fiscal year includes a one-time foreign tax credit write off of $1,935 and creation of a valuation allowance of $798 in Argentina. Further, the movement of funds between various geographies primarily to service our debt facilities also attracts withholding taxes.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flows generated from operating activities, working capital facilities, and term debt. We have historically utilized these resources to finance our operations and make capital expenditures associated with capacity expansion, upgrades of information technologies and service offerings, and business acquisitions. We have historically drawn working capital facilities due to timing of collection from few customers. We have also entered into factoring agreements with financial institutions to sell certain of our accounts receivables under a non-recourse agreements. The Company expects to meet all its debt obligations in a timely manner.

During the current fiscal year, the Company entered a new secured $185 million senior debt facilities, comprising a $165 million term loan and a $20 million revolving credit facility. Under the new senior debt, borrowings will bear a tiered interest rate, which is based on the Company’s consolidated net leverage ratio and is initially set at LIBOR plus 450 basis points. The term loan will have a moratorium on principal repayment for 21 months and quarterly repayments thereafter, beginning November 2022. The loan is subject to certain standardized financial covenants. The Company fully repaid the amounts due under the old senior facilities from the proceeds of the new senior debt facility.

The Term loan is subject to certain covenants, whereby the Company is required to meet certain financial ratios and obligations on a quarterly basis. As of December 31, 2021, the Company was in compliance with all financial covenants.

Cash and cash equivalents

As of December 31, 2021, cash, cash equivalents and restricted cash held by the Company and all its foreign subsidiaries increased by $4,837 to $55,396 as compared to $50,559 as of December 31, 2020. The restricted cash balance as of December 31, 2021, stood at $7,456 as compared to $6,052 as of December 31, 2020. The restricted cash pertains to debt service reserve account (DSRA) that we have to maintain in accordance with the Senior Term Agreement and also for certain term deposits that need to be maintained in accordance with some of our lease and client agreements.

Cash flows from operating activities

For the years ended December 31, 2021, and 2020 we reported net cash flows generated from operating activities of $29,128 and $66,053 respectively. The $36,925 decrease in net cash flows from operating activities was due to a net decrease of $51,419 in cash flows from assets and liabilities, a $28,876 decrease in non-cash reconciling items such as goodwill impairment, impairment of right-of-use assets, deferred tax expense, depreciation and amortization and warrant contra revenue, and a increase of $43,370 in net income. The cash flow from operations were higher in the fiscal 2020 due to the receivable factoring agreements entered into by the Company.

Cash flows used in investing activities

For the years ended December 31, 2021, and 2020 we reported net cash used in investing activities of $45,466 and $17,019 respectively. Increase in cash used in investing activities is mainly due to investment made in CSS Corp.

Cash flows from financing activities

For the years ended December 31, 2021, and 2020 we reported net cash flows generated/(used) in financing activities of $22,073 and $(31,207), respectively. During the year ended December 31, 2021, our net borrowings increased by $25,269 mainly because the Company entered into a new secured senior debt facility and payment of loan processing fees. The Company fully repaid the amounts due under the old senior facilities from the proceeds of the new debt facility. The Company repurchased common stock worth $1,912 during the current fiscal year.

Other factors impacting liquidity

Our business currently has a high concentration in a few principal clients. The loss of a principal client and/or changes in timing or termination of a principal client's product launches or service offerings could have a material adverse effect on our business, liquidity, operating results, or financial condition. These client relationships are further discussed in Item 1A, "Risk Factors". To limit our credit risk, management from time to time will perform credit evaluations of our clients. Management does not believe substantial credit risk existed as of December 31, 2021.

To meet short-term cash needs, we borrow cash from our working capital facilities. These borrowings are typically outstanding for a short period of time before they are repaid. However, our debt balance can fluctuate significantly during any given quarter as part of our ordinary course of business. While we have been successful in bringing our debt levels (net of cash and cash equivalents) down by a considerable amount over the past few quarters, our debt balance at the end of any given period is not necessarily indicative of the debt balance at any other time during that period.

OFF-BALANCE SHEET ARRANGEMENTS

Apart from certain non-recourse receivables factoring as mentioned in the Note 9. "Debt" to our notes to consolidated financial statements included in Item 8, we have no other material off-balance sheet transactions, unconditional purchase obligations or similar instruments, and we are not a guarantor of any other entities’ debt or other financial obligations.

Debt instruments and related covenants

For more information, refer to Note 9, "Debt," to our notes to consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data."

VARIABILITY OF OPERATING RESULTS

We have experienced and expect to continue to experience some quarterly variations in revenue and operating results due to a variety of factors, many of which are outside our control, including: (i) timing and amount of costs incurred to expand capacity in order to provide for volume growth from existing and future clients; (ii) changes in the volume of services provided to principal clients; (iii) expiration or termination of client projects or contracts; (iv) timing of existing and future client product launches or service offerings; (v) seasonal nature of certain clients’ businesses; and (vi) variability in demand for our services by our clients depending on demand for their products or services and/or depending on our performance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing our consolidated financial statements in conformity with US-GAAP, management must undertake decisions that impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions upon which accounting estimates are based. Management applies its best judgment based on its understanding and analysis of the relevant circumstances to reach these decisions. By their nature, these judgments are subject to an inherent degree of uncertainty. Accordingly, actual results may vary significantly from the estimates we have applied.

While our significant accounting policies are described in more detail in Note 2, "Summary of Significant Accounting Policies" to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue recognition

We have identified one main performance obligation for which we invoice our customers, which is to stand ready to provide care services for our customers’ clients. A stand-ready obligation is a promise that a customer will have access to services as and when the customer decides to use them. Ours is considered a stand-ready obligation because the delivery of the underlying service (that is, receiving customer contact and performing the associated care services) is outside of our control or the control of our customer.

As our customers receive and consume the benefit of our services as they are performed and we have the contractual right to invoice for services performed to date, we have concluded that our performance obligation is satisfied over time. Accordingly, we recognize revenue for our services in the month they are performed.

We are generally entitled to invoice for our services on a monthly basis. We invoice according to the hourly and/or per transaction rates stated in each contract for the various activities we perform. Some contracts include opportunities to earn bonuses or include parameters under which we will incur penalties related to performance in any given month. Bonus or penalty amounts are based on the current month’s performance. Formulas are included in the contracts for calculation of any bonus or penalty. There is no other performance in future periods that will impact the bonus or penalty calculation in the current period. We estimate the amount of the bonus or penalty using the “most likely amount” method and we apply this method consistently. The bonus or penalty calculated is generally approved by the client prior to billing (and revenue being recognized).

Timing of revenue recognition may differ from the timing of invoicing. If we receive payment in respect of services prior to the delivery of services, we recognize the payment as an advance from the customer, and it is classified as contract liability. When the related services are performed, the advance is transferred to revenue to the extent the services are rendered.

Goodwill

Goodwill represents the cost of acquired businesses in excess of the fair value of the identifiable tangible and intangible net assets purchased. Goodwill is tested for impairment at least on an annual basis on December 31, or as circumstances warrant based on several factors, including operating results, business plans and future cash flows. We perform an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount. Based on our assessment of events or circumstances, we perform a quantitative assessment of goodwill impairment if it is determined that it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount. Based on the results of our assessments of qualitative factors, we determined that the fair values of all our reporting units are higher than their respective carrying amounts as of December 31, 2021.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As Startek is qualified for Smaller Reporting Company status, this disclosure is not required.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Startek, Inc. and Subsidiaries:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Startek, Inc.
Greenwood Village, Colorado

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Startek, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income/(loss), comprehensive income/ (loss), changes in equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 14, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are containedthe responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of Goodwill Recoverability

As described in Note 3 to the Company’s consolidated financial statements, goodwill totaled $183,397 thousands as of December 31, 2021.  The Company performs an annual assessment of the recoverability of its goodwill during the fourth quarter and performs an assessment on an interim basis when events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value. Based on the results of the impairment testing, the Company has not recorded any impairment charge.

We identified the assessment of the recoverability of goodwill as a critical audit matter. The determination of the fair value of the reporting units requires management to evaluate  significant assumptions including future revenue and terminal growth rates, margin assumptions and discount rates to estimate future cash flows. Auditing management’s significant assumptions used in the assessment of the recoverability of goodwill involved especially challenging and subjective auditor judgment.

The primary procedures we performed to address this Amendment.