SRT - Earnings call transcript Q1 2019

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Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Startek's financial results for the quarter ended March 31, 2019.

Joining us today is Startek's President and Global CEO Lance Rosenzweig, and the company's CFO Ramesh Kamath.

Following their remarks, we will open the call for your questions.

Before we continue, we would like to remind all participants that the discussion today may contain certain statements, which are forward-looking in nature pursuant to the safe harbor provisions of the federal securities laws. These statements are subject to various risks and uncertainties and actual results may differ materially from these projections. uncertainties. listening XX-K call for posted of risks those latest review a all these and XX-Q on and advises to to this the summary Startek their website update Startek these does the not responsibility projections. undertake to Further, the non-GAAP include measures. today discussion may some G, with has company the Regulation back reconciled GAAP-based measurements. In amounts to the accordance these closest section website. reconciliations found the in their The earnings release of can be on the Investors section replay of like to company's via remind of webcast today's now the available call would www.startek.com. I the at that Investors the website be will everyone

CEO Now call I would over to like Rosenzweig. to turn Startek's the President Sir, and Lance proceed. please Global

Lance Rosenzweig

Startek Thank the the year last carried afternoon, Startek first everyone, XXXX common momentum Good into you, Quarter has quarter. quarters In the from see the First is thank and for QX Earnings a it Call. Amanda. second a you our take as joining seasonal XXXX back highs. to to industry, is from all for off first and start step strong

we multiple However, continued programs grow client this despite of ramp to sequentially across seasonality revenue due typical the able geographies. were to

Our and to outsized financial in global U.S., non-telecom in stabilized next-gen our technology, such travel. care experience verticals, as services, growth are we health telecom retail, has and vertical continuing the

our and XXXX. verticals total grew For in of perspective, first XXXX non-telecom of quarter accounted to in revenue revenue XX% for the XX% of

making X in to demand utilization changes client and we continue important meet are we global capacity As footprint. optimize Startek's globally,

in First, country. we that in Jamaica will double are out that our capacity campus building a new

in this half site this second year. expect go live the We to of

families Lanka, to our facility profitable their We that beautiful our country. horrific hit none in in campus location we of adding to the March, In Sri over to we people Argentina. Sri And employ or Argentina. injured our bombings close Lanka. second more that were in in made campuses this incredibly utilization people capacity our resources are optimize and grateful the a our Blanca Bahía reallocate to decision X,XXX third, are in and Second we

our managed extraordinarily Lankan and of We who are team crisis local there proud clients our extremely Sri well. the

We be ahead with are to this second full thrilled our quarter. fully expect location proceeding plans our which operational we're there, we that to for speed announce

Startek strong on sequential improvement client-centric During management quarter, by margin, and high-growth focus the our generated reinforced first verticals. gross a model in continued serving new

margin We a on being combination, industry. every gross a since basis our in have premium quarter consistently now the our sequential increased continuous commitment provider reflecting business to

as the categories, digital list major a XXX these of across for Outsourcing and and as by IAOP Best transformation call position Ramesh? results. Startek's provider. now turn an our to go industry-leading solutions center like over our I was we in last Startek keenly clients our As that typical the our for high-value, we've past, beyond support. is call for multiple accolades technology-driven month stated on This received when focused providing reflected further chatbot. Edge efforts helpdesk management. innovative Startek for and proprietary CX received from IT our solidifies Global XXXX leader Receiving innovation. transformation thereafter, accomplishment CIO for the through the financial XX we were CX Council Top shortly Award and named including to early performance the leadership our digital Kamath team April, awards In recognized Ramesh and IDG Digital Executive in And further a top is you take CFO services being our several to to would

Ramesh Kamath

year financials regards limitations today The financial for combined provide Aegis are Due March Thank to period. ago results Startek quarterly the information, afternoon, we to January unable reporting from certain includes financials in we XX, to everyone. are available publicly good you, to Lance, and XXXX. and company the Xst

quarter-over-quarter be would major comparisons, results more year-on-year with believe companies X against highlight commentary of we discuss not be will we comparing would X. the each the for general Instead, financials trends drivers result, and a qualitative as it item. As we effective about the to

This are new Margins compared in the million December and has to quarter which local million, X% in XX.X% with of to geographies, the X the total serving XX, to $XXX.X increased existing to to the across quarter for Gross top results globe. to a client and existing percentage million noted quarter across a momentum further quarter with today, comparative million due line generate was the mantra driven $XX.X from for for the ending our ended million been step by quarter growth increased next-gen and quarter diversified The $XX.X ramp December programs as Having our to release to benefit truly our quarter December new sequential to gross expanded compared This the that, stream. quarter the December both revenue footprint revenue said XX, margin to clients and programs press X XXXX, we of $XXX.X million typically clients improved local management in our the and as continued growth rollout financial profit technology, seasonality, in aided compared on XXXX. and of travel. $XX.X created continue new XX.X% we the geographies. was has the health in have back once client-centric included as still SG&A high-growth $XX.X our multiple ending able ending the of X% model was XX, to such a of takes retail, XXXX. XX, by the focus quarter but As speaks for in again the business services, sequentially, impressive due Aegis verticals, serving both the compared primarily result. fact primarily continued XXXX. care Startek ramp both

XX.X% in compared a December new XX.X% XX, loss share As process Jamaica of and additional Sri of the are to to building investments we quarter share of in increase $X.X $X.X the was technology compared negative SG&A Lanka. in as our was negative percentage by costs a Net revenue, ending loss rent a driven is for and with facilities and sales, a $X.XX million quarter or that XXXX. the $X.XX per million per the

we quarter, normalized to compared quarter December previous basis combination. the restructuring lower was $XX.X is from would business the is $XX.X million XX, million loss Adjusted incur continue what a costs than it higher XXXX. the for the EBITDA ending and we as to merger-related on this than quarter expect in Although

a adjusted remarks. Lance? to over As X.X% was to call in compared prepared concludes Lance. percentage the my quarter before. of back now revenue, This turn EBITDA the I'll X.X%

Lance Rosenzweig

you, Ramesh. Thank

technologies ahead, engage on delivering continue help our focus best-in-class implementing solutions As will with better we look and Startek customers. transformative to clients to omni-channel their

business to perspective technology our a our to we open and revenue are now to the sales, marketing Operator, committed ensure our continuously to strong we I our call for from at back, innovation will growing questions. continue serve Ramesh We clients. will also momentum and margin With XXXX. delivering better growth bolster expansion and reinvest pipeline, remain in in driving

Operator

you. Our from Thank Baird. the Koning comes Instructions] first [Operator David question line of of

open. is line Your

David Koning

you on Yes. Hey guys, momentum. thank the congrats and

Lance Rosenzweig

you, David. Thank

David Koning

you out. guess, and know decline this I just And and QX new last I don't signings that it's and I'm is helping I typically, that in Or maybe, maybe of kind have a And was you would everything, just Amazon trend in examples kind wondering, QX? sequentially now? it to healthy about are buck of Yes. quarter, wondering QX it? I I guess, expect again a if you but driving client you right expect with if that the a can know, you quarter of couple kind little too mentioned talk

Lance Rosenzweig

client peak growth that What And vertical Thank is us, QX, was our affected seasonality the globe. and would continuing despite you, that David. our fortunate and benefited is base geographies. the Sure, also our seasonal I is in across our our retail say decline broad growth to our grow vertical. Typically, retail It or it's in we're based. based across yes. was very QX being that across by in the broad seasonal for

growing seasonality. also verticals to helping which more smooth is non-retail out of sorry, what in We non-telecom again verticals terms would are rapidly, one see to expect our -- our

performing QX. QX, and basis. And would on in guidance We are expectation see you giving is kind terms a of revenues. global not an of Startek nicely forward-looking in industry again, slower But consistently of

David Koning

through then you million-or-so right, $XX remember thing QX? last the something I Okay. about I target is, quarter mentioned through if update think, And synergies. long-term have of originally I second gave on $XX know Do kind might Great. you I guess, million, went the you. million of that synergies. you Thank you that any $XX a have annualized

Lance Rosenzweig

Yes.

nicely. Our side revenue as the the progress. progress very happy synergy on our cost as synergies on equation both is And we're proceeding towards well of very

could or box free to becomes quarterly what ahead quantify more basis decision example, a our fronts synergy I We not we to box. have Ramesh, would a or both a it on expectations. goes by, as to non-synergy say, time client of made it because kind you win, a, internal it along put But forward feel as new it's going a on well, that for and of performing whether origination difficult is are comment the categorize and

Ramesh Kamath

much a from $XX are I Lance, of continuing now. with expected. are moving agree initiatives are cost we quarter David, But than you savings There we that better couple million remember, quarter. till almost last did plus you which if last what we of

to a initiatives classifying Beyond this doing keep should saying as all while. not internally, we going be kept part synergy that, further that we're of we any because such the only

on it million. a is our we'll looked I show So conservative we use difficult Lance the are little quite think having -- nicely. on $XX our a word, meet just a But everything think, synergy the even to it, revenue we basis, under little we bucket And as -- we've to mentioned, are done to And gets focus that, Lance's I that said on proceeding targets. put synergy. sometimes, when at tempting

David Koning

cash expense. looked my flow negative. interest And cash of was flow on question kind Great. QX and like mildly last Okay. just It

expect that's there Now million the is so in would was there pretty flow the expense, cash industry the year you lot is the normal And positive? go that normalized Do of in of a be of for kind rest think we anything pretty a in hurt interest forward? have $X.X to or that you I QX. number? as

Ramesh Kamath

it our flows cash improve. a It down so interest as come charge, is should normalized not

normalize has and about two, yes, as expect So industry. by And you my to spotted compared million have debt normal come the down up. for correctly number it's yes, quarters gone roughly. previous out, our gone it I right Number it has $X.X one. you pointed in net quarter, ahead, up pretty to that's it the

picks ahead. think, cash we our flow should business moving As quite be up, as up, comfortable our picks in I

David Koning

nice job. Okay. Great. Thanks guys,

Ramesh Kamath

David. Thanks,

Lance Rosenzweig

David. Thanks,

Operator

Omar Instructions] of you. a the private Thank line Samalot, investor. comes [Operator from Our next question

open. Your line is

Omar Samalot

guys, Hey how are you?

Lance Rosenzweig

you. Omar. Excellent, Thank

Omar Samalot

guys you a puts growth Very nice some quarter. improvement little EPS a versus lower I and basis think probably the bit see -- loss margin on on to continued that last non-GAAP

So that's on a good that. job. Congratulations

Lance Rosenzweig

very Thank you much.

Omar Samalot

went wanted color any are also there more to SG&A if little It I you know if I bit the wondering one-timers? bit a that up was quarter-over-quarter. X.X% could amount about more give little and us a in like why to there's increase.

Ramesh Kamath

Omar...

Lance Rosenzweig

Yes.

comment into Let sort of can me details. give general and some dig then Ramesh a

So in generally increases -- our client with along and in wins, new with that growing business expenses. comes with increased

So our we fruits and example. the technology And reinvesting we're sales, our that. of in for seeing are

as clients. accommodate grow, facilities growing new we We we out our also build and

are let happy investments. it Ramesh And over kinds turn of to color. for we more make So those to me

Ramesh Kamath

happening. mentioned, one-offs from there couple Lance apart Omar, has what So are Yes, of a

there you if doubtful we every you see we flow, first provision Because onwards, if hard an is made. them of receivables. have extremely remember of in that debts quarter a look the cash at $XXX,XXX the One for taken

about provision the repeat conservative that. more review having it. a said should are have Again, in that I think, that, is I that less also. but We collections are I'm hopeful said I same will against that the of made some the time or large quite part going way very complete. AR We thing our I And we

future. in So I'm not truly the you know never happening, expecting but too much

keep will another one-off our there, I it's So in is one-off, say this but business one-off. these a may coming. There things which is

I predict can't So that.

Omar Samalot

Okay.

enough. fair Okay,

continued -- so said you is is just guess I is part just review. to the that from and growth. it my And AR it due another guys investment then So part take what with of of

a successful So Is progress this we accounts that I collection guess, assumption? weren't quarter. the doubtful those of fair in

Ramesh Kamath

said collected What Yes. we in have much that small There the collected amount of in not some having provisioned December. been April. But quarter following we have got has earlier, a much progress. that, actually

So I that I mean, account it obviously, much. can't for

Omar Samalot

they far? Okay. And DSOs, the AR how so since we're subject, about how in are running

Ramesh Kamath

our calculate, has our day. by our and DSO differ. formula improved. AR were But you formula, that if actually see you X If DSO, actually your to we've formula in improved may

thing. bad a not that's So

Omar Samalot

Very very Okay. good. good,

On about of other a interest XX%. that jump, there's can if of expense, it that. going so, was wondering I expenses kind the or expense, there to was that, all and And somewhat stuff one-time interest if on interest consider we thing? related caused it's significant also other

Ramesh Kamath

Yes.

time. some also accordingly, I So is that. is rates. of not one small the our is is up, go costs helping. because other on It's they much interest not to, goes amount one if interest linked And a what think, regular interest And variable our on too and that's interest

much. come there see we interest the once is, costs more -- down, of I a interest think, just that. rates as mentioned, So coming not our small And will I start one-off, down because

Omar Samalot

non-U. that telecom-related enough. markets? have think XXXX. do then How was if been early the mentioned on How that, see you that share? you that That's in guys previously, the had declines itself would see it. you it probably you progressing? that had view work out experiencing I got you by a I through can Okay, S. do fair wondering

Lance Rosenzweig

it's our we seeing that secular seeing sector in out the happy telco that and others has Outside the One, countries some where country. of U.S., in There very are we're seeing are are that vertical by U.S. growth vertical call decline. where varied decline are we strong Yes, telecom I'll is market. India, commodity of sort their stabilized.

business, more the that business, growing. winning which advanced is cetera, team communication, multimedia be successful upmarket non-commodity of winning and Our the is on services, focused would communication, et corporate stable very in or very

are of and shifting more market. And margin so commoditized the that more parts of we our from higher focus end that to market growing the

Omar Samalot

the LISA. Perfect, to mentioned, through last called could interesting minutes an how makes that to your wonder if that any you Ideal trying awesome. take platform respond without few I proprietary you're talk And And then was for combine to found is. customer my approach experience the article humanizing also what what question, that example, a if recently of sort really us I chatbot, found sense? Dialogue customers I chatbot,

Lance Rosenzweig

exciting of as our LISA is omni-channel Both Yes, integrated platform our as well LISA our Ideal it's a an really platform. business. part platform. Dialogue

that our For communicates can help any e-mail our with clients information communication all at how do media example, entire on our their good process, integrated with phone, an and and which able chat together to utilize our way and basis, in in social is. are communicating so is corporate we can social platform are of the that our resolution the the them, and through traditional that way and Dialogue the the channels, issue their customer customers Ideal process. they're that including have agents media platform is what through on communication what so all so we a clients various issues channels. front-end And

uniquely for are we et recruit our So for both in effective. Ideal to kind become who runs client, help people that agents clients through as of at the our we're to as recruiting we're process, management at training, able where as end it good cetera. help our bots for And directly to particular well able automation begins add to Dialogue, more working

customers give So team both technologies part integrated escalate person. to our push and to solve their members toward also needing support a to and the of transformation our without better to problems it's digital using to all opportunity

Omar Samalot

Thank much you guys. nice. Very very

Lance Rosenzweig

Omar. Thanks

Operator

Rosenzweig remarks. our for like Mr. for over today. the turn conference to this to question-and-answer And does conclude I'd closing the back session Lance

Lance Rosenzweig

your this and to then, in month quarterly Startek. New available for ourselves when forward with speaking to continued you and this investors, look make by meet all If happy support We'll of we're always speak later August. we next, and results you us joining Amanda, again, York we Thank with report for our phone. be thank we afternoon you in to don't

Operator

the conference. does program. Ladies This and in today's participation for gentlemen, thank conclude your you

You great may have day. now a Everyone, disconnect.

Startek (SRT) 10 May 192019 Q1 Earnings call transcript