Exhibit 99.1
StarTek, Inc. Reports Continued Revenue Growth and
Sequential Margin Improvement
Adds Two New Clients to Portfolio
DENVER--(BUSINESS WIRE)--Nov. 1, 2006--StarTek, Inc. (NYSE: SRT)
reported third quarter fully diluted earnings per share from
continuing operations of $0.11, an increase of $0.05 per share from
the previous quarter. Fully diluted earnings per share from continuing
operations for the third quarter of 2005 were $0.25.
Third quarter 2006 revenue of $61.9 million reflected an increase
of 15% over the same period in the prior year. New clients launched
during the past 12 months provided the Company with $12.2 million in
incremental revenue during the third quarter of 2006. Total revenue
from these new clients increased 39% over the previous quarter of
2006. Partially offsetting these revenue increases were declines in
volume from StarTek's two largest clients. The Company also signed two
new clients during the quarter, including Comcast, which is the
Company's first named Intelligent Enterprise client.
Sequentially, gross margin increased from 14% in the second
quarter to 16% in the third quarter of 2006, reflecting progress in
the ramp process for the Company's three new call centers. Gross
margin during the third quarter of 2006 represented a decline from 23%
in the same quarter of 2005. This decline was primarily attributable
to higher carrying costs of three new call centers as a percentage of
revenue, which was driven by higher-than-normal agent attrition
associated with the continued ramp of the new call centers, increased
competition for labor in certain of the Company's call center
locations and some seasonality in the labor pool from which the
Company draws. Gross margin for the quarter was also affected by a
$0.9 million foreign exchange impact of a strengthening Canadian
dollar versus the U.S. dollar.
As a percentage of revenue, selling, general and administrative
expenses declined from 13% in the third quarter of 2005 to 12% during
the same quarter of 2006. However, total selling, general and
administrative expenses increased slightly as a result of incremental
expenses incurred to support three new facilities opened during 2006.
Net interest and other income was $0.7 million higher in the third
quarter of 2005 as a result of a gain on the sale of a facility in
that year. Net income from continuing operations was $1.6 million
during the third quarter of 2006, versus $3.7 million in the same
period of 2005.
"The announcements of two new clients during the quarter as well
as our double-digit revenue growth and sequentially improving margins
are a testament to the progress we've made thus far in growing the
company," said Steve Butler, President and CEO of StarTek. "As the
ramp process for our new call centers draws closer to completion, we
believe we have positioned StarTek well for future growth
opportunities. We remain focused on strengthening the relationships we
have with our current clients and on seeking out new opportunities to
provide value-added services to the outsourcing marketplace."
The Board of Directors declared a quarterly dividend of $0.25 per
share, payable on November 27, 2006, to the Company's stockholders of
record as of November 15, 2006.
About StarTek
StarTek, Inc. (NYSE: SRT) is a leading provider of Business
Process Optimization services for outsourced customer interactions.
Since 1987, StarTek has provided customer experience management
solutions that solve strategic business challenges so that fast-moving
businesses can effectively manage customer relationships across all
contact points - web, voice, email, fax, and video. This blended
solution helps companies create and maintain customer satisfaction and
frees them to focus on preserving capital, while StarTek delivers the
ultimate customer experience. The company is managed by executives
from the Financial, Cable MSO, CRM and business services industries.
Headquartered in Denver, Colorado, StarTek has 19 operational
facilities across North America. For more information visit the
company's website at www.StarTek.com.
Conference Call
The Company will host a conference call on November 1, 2006, to
discuss the Company's financial results. The call will begin at 6:30
a.m. Mountain Time (8:30 a.m. Eastern Time) and can be accessed as
follows:
USA: 866-510-0712
International: 617-597-5380
Passcode: 99118159
Conference Host: Steve Butler
A dial-in replay will be available from November 1, 2006, at 10:30
a.m. Mountain Time through November 8, 2006, and can be accessed as
follows:
USA: 888-286-8010
International: 617-801-6888
Passcode: 82394224
A web-based replay will be available on November 9, 2006, and
accessible from the Investor Relations section of the company's
website at www.startek.com.
Forward-Looking Statements
The matters regarding the future discussed in this news release
include forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Such statements are subject
to a number of risks and uncertainties. The following are important
risks and uncertainties relating to StarTek's business that could
cause StarTek's actual results to differ materially from those
expressed or implied by any such forward-looking statements. These
include, but are not limited to, risks relating to revenue from its
principal clients, concentration of its client base in the
telecommunications industry, consolidation in the telecommunications
industry, risks related to fluctuations in the value of its investment
securities portfolio, inability to effectively manage capacity, highly
competitive markets, risks related to its contracts, decreases in
numbers of vendors used by clients or potential clients, lack of
success of StarTek's clients' products or services, considerable
pricing pressure, risks associated with advanced technologies,
inability to effectively manage growth, dependence on and requirement
to recruit qualified employees, including additional sales personnel
and key management personnel, potential future declines in revenue,
lack of a significant international presence, and foreign exchange
risks and other risks relating to conducting business in Canada.
Readers are encouraged to review Management's Discussion and Analysis
of Financial Condition and Results of Operations - Risk Factors and
all other disclosures appearing in the Company's Form 10-K for the
year ended December 31, 2005, and subsequent filings with the
Securities and Exchange Commission.
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
2006 2005 2006 2005
---------- -------- --------- ---------
Revenue $61,865 $53,877 $178,495 $158,206
Cost of services 52,104 41,353 150,758 121,645
---------- -------- --------- ---------
Gross profit 9,761 12,524 27,737 36,561
Selling, general and
administrative expenses 7,533 7,190 22,495 21,402
---------- -------- --------- ---------
Operating profit 2,228 5,334 5,242 15,159
Net interest and other income 337 1,060 1,403 1,098
---------- -------- --------- ---------
Income from continuing
operations before income taxes 2,565 6,394 6,645 16,257
Income tax expense 995 2,743 2,114 6,584
---------- -------- --------- ---------
Income from continuing
operations 1,570 3,651 4,531 9,673
---------- -------- --------- ---------
Discontinued operations:
Loss from operations of
discontinued operations - (820) - (1,941)
Income tax benefit - 343 - 731
---------- -------- --------- ---------
Loss on discontinued operations - (477) - (1,210)
---------- -------- --------- ---------
Net income $1,570 $3,174 $4,531 $8,463
========== ======== ========= =========
Basic shares outstanding 14,696 14,631 14,674 14,628
Diluted shares outstanding 14,696 14,673 14,715 14,676
Net income per share from
continuing operations:
Basic $0.11 $0.25 $0.31 $0.66
========== ======== ========= =========
Diluted $0.11 $0.25 $0.31 $0.66
========== ======== ========= =========
Net income per share including
discontinued operations:
Basic $0.11 $0.22 $0.31 $0.58
========== ======== ========= =========
Diluted $0.11 $0.22 $0.31 $0.58
========== ======== ========= =========
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
September 30, December 31,
2006 2005
------------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $9,270 $17,425
Investments 17,995 28,168
Trade accounts receivable, less allowance
for doubtful accounts of $8 and $250,
respectively 47,870 40,612
Income tax receivable 1,235 4,227
Prepaid expenses and other current assets 2,130 3,161
------------- ------------
Total current assets 78,500 93,593
Property, plant and equipment, net 61,281 57,066
Long-term deferred tax assets 3,931 2,402
Note receivable 740 740
Other assets 670 113
------------- ------------
Total assets $145,122 $153,914
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,886 $4,744
Accrued liabilities:
Accrued payroll 5,257 7,280
Accrued compensated absences 3,986 3,522
Accrued health insurance 112 462
Other accrued liabilities 300 806
Current portion of long-term debt 2,621 2,551
Short-term deferred income tax liabilities 1,092 1,108
Other short-term liabilities 1,481 1,150
------------- ------------
Total current liabilities 19,735 21,623
Long-term debt, less current portion 1,141 3,099
Long-term deferred rent 1,554 247
Other liabilities 955 781
------------- ------------
Total liabilities 23,385 25,750
------------- ------------
Stockholders' equity:
Common stock 147 146
Additional paid-in capital 61,627 60,139
Accumulated other comprehensive income 1,945 1,776
Retained earnings 58,018 66,103
------------- ------------
Total stockholders' equity 121,737 128,164
------------- ------------
Total liabilities and stockholders' equity $145,122 $153,914
============= ============
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands, unaudited)
Nine Months Ended
September 30,
-------------------
2006 2005
--------- ---------
Operating Activities
Net income $4,531 $8,463
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 12,468 9,744
Non-cash compensation cost 242 -
Deferred income taxes (1,528) (943)
Realized (gain) loss on investments (36) 711
Gain on sale of assets (98) (857)
Changes in operating assets and liabilities:
Sales of trading securities, net - 2,940
Trade accounts receivable, net (7,258) 12,371
Prepaid expenses and other assets 348 416
Accounts payable 143 (3,114)
Income taxes receivable, net 2,992 10,794
Accrued and other liabilities (604) (486)
--------- ---------
Net cash provided by operating activities 11,200 40,039
--------- ---------
Investing Activities
Purchases of investments available for sale (200,355) (633,045)
Proceeds from disposition of investments available
for sale 210,604 617,405
Purchases of property, plant and equipment (16,116) (7,315)
Proceeds from disposition of property, plant and
equipment 343 1,292
--------- ---------
Net cash used in investing activities (5,524) (21,663)
--------- ---------
Financing Activities
Proceeds from stock option exercises 1,112 295
Principal payments on borrowings (1,888) (3,950)
Dividend payments (12,616) (16,676)
Proceeds from borrowings - 880
--------- ---------
Net cash used in financing activities (13,392) (19,451)
Effect of exchange rate changes on cash (439) 451
--------- ---------
Net decrease in cash and cash equivalents (8,155) (624)
Cash and cash equivalents at beginning of period 17,425 14,609
--------- ---------
Cash and cash equivalents at end of period $9,270 $13,985
========= =========
CONTACT: StarTek, Inc.
Steve Butler, 303-262-4500
President, Chief Executive Officer
steve.butler@startek.com
or
Jennifer Martin, 303-262-4587
Director, SEC Reporting and Compliance
jennifer.martin@startek.com