SRT - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss StarTek's financial results for the quarter ended September 30 2019.

Joining us today are StarTek's President and Global CEO, Lance Rosenzweig; and the company's CFO, Ramesh Kamath.

Following their remarks, we'll 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 based on information currently available to us and are subject to various risks and uncertainties that could cause actual results to differ materially. 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 its website update StarTek any does the not responsibility forward-looking undertake statements. to Further measures. some the today discussion include non-GAAP may Regulation company has with to amounts reconciled the measurement. GAAP-based closest G, accordance these back In the The Investor their of Relations be website. in earnings the found can section reconciliations release the on

a section webcast available I the replay today's would everyone like www.startek.com. be Investors to call at via website that the of remind company's will of

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

Lance Rosenzweig

Thank you, Good everyone, all and thank Daniel. joining. for afternoon, you

over since synergies, one drive record combination execute all with last in Our our was improvements of with third have year with strongest model create Aegis. our in The a of last high work translating in quarter margin sales place the we integrate gross and StarTek EBITDA client-centric year's pipeline, are history operating material revenue, on put to Aegis business the into powerful the business. adjusted and

that management. pleased Aegis a our to platform such results customer proving out are very the StarTek thesis create are We strong global and and now in experience combining operating

in These XXXX. strategy. XX% non-telco XX% our verticals last have of XX% further accounted revenue, client solid calendar results In supported and by quarter for been diversification QX, our up from

retail, client services targeting come new our and travel of accelerate education. financial exciting have we wins new that geographies we by organically stated are technology, As verticals clients also like from growth. clients' even driven in on the growth, have Most next-gen high-growth focused cross-selling and healthcare, both highly these and and our own by services past,

prospects broadband cable new StarTek long where growth growing not solutions in third does from opportunities However, attractive and experience leader wireless we broad suite like of and a verticals that margins. us businesses. telco with as during find or strong customer U.K.-based just media and telco right And is found business in the quarter this now that as mobile we winning management established company's a providing the for preclude

We new seen management accounts subsequent solutions. long tailwinds. in in more this receivable both than of expect and StarTek operating have successful had vertical client XXXX history into experience headwinds and has launches in management customer companies a recent with the telco launch years a and

U.K. telco However, today our most telco continue telco is even India. vertical of strong We to showing business stable our in growing our is with softness U.S. and do growth. and region see

decided particular a to we not due limited of opportunity and growth. on quarter, bid renewal client for one to the low-margin During Indian its telco characteristics

as result decision StarTek some committed with growth We our means best. to offset in experience in provider be positioning differentiated This companies, right truly this an term, its the in near premium will a will growing at companies is our industry, the which for customers. StarTek remain Although revenue the is of margins. that the seeking where are partnering improvement a and their

as for a during our of in one pure for to profitability, operations the growth a the across traditional this pricing that that serve partner customer market high improvements addition as solution and is call which are merely As and a is relationships the our their them momentum end we ultimately help we signed technology strategic captive services. our Building and the very where serving outsourcing our achieve winning an expanded from exciting with strategy we customer with in we client. This SaaS-driven of quarter is business to this center on StarTek the past, new are client's us working. engagement, which we our the have support to clients in different want driving and mindset organization vendor stated clients at goals, tells providing the seeing care

StarTek deliver further small reflected IDG one India's with our over named digital I of has as won the team's India; margins growing is IT award our a the work most BPO comes & accomplished value-added we by This our SaaS being recently position in into year over While teams the Malaysia as couple offering the relatively Aon's recognized including StarTek the best being as recognizing by and am employer success innovation organization Frost has leverages our numerous great solutions. in the in a for experiences very our that award, work. what partner year, of transformed extraordinary a proud clients, have our months, engagement, to awards last CIO as a the to the place it receiving initiatives AI-powered in strong and clients. same winning great digital time to purpose-driven incredibly demonstrates Sullivan, customer at just XXX and and technology of while

our quarter, Finally, during globally the rebranding as completed we now to go and StarTek. market we

around Our finest is and StarTek our the by the under marketing, brand. We now and brands. rebranding have uniformity employees very passionate partner well about world's StarTek was for becoming in and the world. clients sales global received operations, consistency the premier

like remarks, you the to quarter. for to StarTek's now Before our I the closing wrap through over take to results turn financial I Kamath, CFO, up Ramesh? Ramesh with call would

Ramesh Kamath

provide you, year Due unable period. are to and and The from company regard StarTek today from X we to financials for Thank the publicly July group certain include the limitations XXXX. financial Lance. combined ago reporting XX, Aegis we with quarterly available September to are financials results the to is information,

sequential reporting financials we the to year-over-year will as about would results commentary line portion that of trends highlight highlight results be the companies drivers certain as lap be quarter result, quarter-over-quarter each of the only two for major our will a one Instead item. more would and comparisons, general a we final discuss against be merger. for not effective the with qualitative the we will This the it we comparing of quarter. we anniversary As the believe

million Well in quarter for XX, compared moving to $XXX.X revenues the sequentially as June to $XXX.X quarter X% XXXX. ended on, million total the increased

increase have As quarter year. basis expanding we record our business profit XX% gross continue non-telcos again compared XX for the with margins million Lance to sequentially, percentage to to quarter mix QX. verticals with the increased $XX.X compared of every up XX.X%. as quarter second high-growth with revenue the increasing revenue to track Aegis margin once the points keeping last of improved the XX.X% since with X% combination Gross for $XX.X accounting in mentioned, to our in as in million Margins

from as enables which Margins utilization to result $XX.X million employee to to as million us our premium benefit which enables margins client-centric improve pricing. June in ending our the quarter for positioning compared StarTek quarter was across $XX.X also Our to XX, model, XXXX. management command stronger of provider, a a continue continue the as stronger footprint. global SG&A

As a percentage XX.X% legal repairs, drivers of as revenue, communication, on costs. the by and other to XX.X% provision spend SG&A local infrastructure compared with driven for was improvement doubtful debts,

as for million the in $X.XX quarter loss share per share $X.XX of compared or loss a June million to the $X.X per XX. or ending $X.X quarter Net was

quarter been deferred the had this below improved it would losses and exchange for even foreign line. it not adjustments loss the net have tax Although, been better operating

in strongly XX, to $XX $XX.X the quarter compared quarter million, increased Adjusted EBITDA to June ending XXXX. the million for as

was revenue percentage adjusted X.X% a of to compared As as EBITDA X.X%.

earlier, efficiency. As our executing culmination here Lance and reflect synergies, including last our the mentioned over improvements year, various the operational group of one optimization initiatives cost

million $XX million by quarter, over we debt September, our June at of end the to to net $XXX.X reduced the compared XX. During at million $XXX.X as

focused flow with We our my keeping cycle remain will available tight remarks. a support on cash to adequate prepared concludes This growth. but funds

the Lance. Lance? call to back over turn to now will I

Lance Rosenzweig

Thank you, Ramesh.

has year to Aegis past StarTek's worked into very a team Our success. merger hard turn with great this

can this are powerful that bring employees our demonstrate quarter our shareholders. We clients, we and our pleased our to now the results advantages

anniversary of the provide are more sustainable on Aegis the combination us a strong for StarTek. position in believe color outlook With business longer-term to I we now behind our

and and about We have of the we shareholders the met the down for asked with consistently potential are road. past our prospective StarTek over year investors many

annual policy keep matter a have financial company and we continue As place. not that provided to guidance, of in policy, will

it think they can expectations the StarTek. why so investors, understand we excited that unlocking are and our vision so to about do with important we However, share at potential is we are

a to of is capable and StarTek experience ultimately expect becoming double-digit leader become customer solutions organization innovative billion We EBITDA delivering margins. management of tech-enabled that $X consistently

can before achieving we I believe get $X to years of happen in While do next well billion in EBITDA we couple in low double-digit the revenue. margins this expect don't to XXXX,

ample portion revenue opportunity we taking telco growth of our over mix total strong some growth. margins with and elsewhere stronger our with offsetting India, Although, headwinds in is and for ramping have a

provider. Our seeking The and with sales the will forward numerous around StarTek bring is I benefits robust us stakeholders. to high-growth premium of best our for world years right this are prospects pipeline look all the to in front a

like and I for now Ramesh will to open up questions. the Daniel, call

Operator

Lake Our from with Mark [Operator comes Street Argento capital. Instructions] question first

Mark Argento

and Lance Ramesh. morning, Good

you're Just a a activity non-telco traction And to XX%. into that a you're quick telco the you in? with some areas. getting Could areas – little vertical of some see some the you of – bit with forward? Obviously, seeing down other highlighted seeing traction strength wanted I being – delve the the the going couple some in you're good where

Lance Rosenzweig

a of niche broad verticals. quite spectrum really in we range wonderful in strong in We're our geographies. strong and vertical. retail seeing a have of diverse next-gen of broader opportunities education Thank really growth growth pretty We're Mark. diverse Yeah. kind It's you, particularly seeing vertical in health where actually travel some a in care our

Mark Argento

also in kind then ability of seen of client cross to same you revenue more areas sell And the expand Great. in others? have certain than terms

Lance Rosenzweig

a benefiting part world winning to clients. and within that from have things teams is deal that verticals that as due it also the rapidly of just We a performance business ourselves very we're themselves. client in growth their and our so fine with really prioritize grow. growth of they have the executing with performance. well. new we're of vertical levels partners some that some that thrilled And third, we're function focus growing and perform the And a some that largest high as diversification they clients companies and with growth the and are on our think is some aligning finest of we A number disproportionately we increasingly that is we're operating And the client well. of part second with grow I businesses of

Mark Argento

That's to mean, number. good sheet, quarter the million. $XX basis kind I of you said million helpful. a you And Like balance trailing pretty $XX just this XX-month Great. EBITDA up then turning put

legacy the around opportunity a facility still thoughts What find balance sheet guys facility of lot of the there's sheet we merger. terms pre of you terms think forward? In in the the in legacy are balance I going that debt

Lance Rosenzweig

income quarter we've I performance. EBITDA excellent growing are revenues done tremendously really just our we're Yeah think and quite improving an excited statement operating in the about grew and this job

terms two support our of which of work merger sure future growth. In balance the capital at a place make continuing we legacy the and have the structure to are was in to we debt right we've do sheet, to in got our companies place

you maybe to want that color Ramesh add to a as little So well?

Ramesh Kamath

Lance. No,

are – lid into I focus our and comfortable and large that that, it a of a going EBITDA convert able we tight improve flows a try up quite cash our is well. summed cash that on and to to we I'm change. think you've part keep not were and

Lance Rosenzweig

where you net was the think that I than $XX quarter. lower the quarters the our in And numbers for million debt saw prior

Mark Argento

to great. deleveraging It's so see happen that's nice the

the do got in you obviously one you revenues the terms of last growing. the need one keep to what long-term margin revenues double-digit target Just get EBITDA

happen the be need You do happen of need CapEx you you into achieve what investment of see to that business need EBITDA see EBITDA margins. a – double-digit able to What that bunch do to margin? level have to to

Lance Rosenzweig

be capacity the utilization much generating returns that will are lot to of great the at to will margins. a question. do able then new EBITDA same I a of contribute grow other that on required with revenue and there existing factors our One while if but that in it that benefit capacity. we're Part has for It's improved minimizing clients time capacity think of has the incremental higher is capacity to CapEx

try we're without huge CapEx. So, to requiring increases utilization to capacity tightly do managing very in it our

sophisticated our very forward. support though, In requirements have sheet working where and do their some areas we going CapEx growth with well are we'll operating funding as as be clients that we sources balance our to from

Mark Argento

anniversary one-year nice the work. on Congrats

way. You guys a Thanks. have long come

Lance Rosenzweig

it. appreciate Thank you, Mark, really

Operator

you. Thank

question next Omar [ph]. from comes Our Samaha Please proceed.

Unidentified Analyst

how are you? guys Hey,

Lance Rosenzweig

Excellent Omar.

Unidentified Analyst

a flow here I and really EBITDA done lower cash mean A higher positive debt like guys. – Good. income to well growth, operating that's free to what congratulations sincere lot guys and revenue you I repayment SG&A and job

Lance Rosenzweig

Thank it. appreciate We you.

Unidentified Analyst

Okay.

higher So from could tax essentially the breakeven you guys taxes to than quarter expense before net explain loss? that that took for usual the you

Ramesh Kamath

this? take I shall Lance,

Lance Rosenzweig

Ramesh. Yeah, please

Unidentified Participant

During started first make retained dividending help of appropriate the $X.XX upstream our to the or do dividend time, to opening dividend under the an that million. time. we us whether that deferred cash we on quarter taxes the particular geographies provision started two presumption is pay streaming that be first we geographies future, our on a the accounting debt. couple of tax results, and the retained up withholding tax to move company a will in the of provided for In we only entire its on the once standard started Because it's of country/company. had therefore, And we earnings the in all again needs earnings where that of for

So was significant impact. that a

The second tax dividend, further to too on receive in foreign as to the so want is offset, they companies unable have typical investment That we approximately. much expense they're taxes any was pay impact another it receive, is don't dividends companies if income is they when $XXX,XXX off. credit withholding tax they which investment the to have

started out, over profits my take making $X.X left quarter. to you between have largely. you because $X.X with if taxable last So those are all which two is geographies That's million, higher the million

Does Omar? that explain

Unidentified Analyst

Absolutely.

You were sure. that question Thank ready you. for for

Ramesh Kamath

I Yeah. The and me would. Board also had somebody knew asked

Unidentified Analyst

Okay.

So gross could growth. it higher it higher marginally even the although sequentially, was the margin been seems that revenue have given

if that is costs that explain you you're that to associated are we -- speak? as could programs are up due ramping with incurring So new

Ramesh Kamath

Yes.

and cost even which the at it hold there. earlier we earlier explained every starts down margins ramping, associated, the margins revenue, there therefore, Lance start a growth tends in in to that than As time calls is and times

a in bad So sense not it's sign. a

Unidentified Analyst

rough cash like expense it. that $X.X amortization I cash you $XX then you make. And addition quick a million to you calculation got for Okay, it after the long-term quarter to with Correct? positive the doing about and flow in guys interest million free in have by payment that and -- so guys about short-term were debt looks debt repaid

Ramesh Kamath

clear up, we'll have That's so one And right. we payment coming to use that that.

Unidentified Analyst

efforts some I Malaysia, was noticed you're for has Arabia, or stemmed increase growth? from activity is the markets. increased could wondering offshore if if it markets okay. hiring to as those business have your of most hiring programs new Okay, such switching, in your from add that activity Saudi India, color actual that in I the Philippines. And you

Lance Rosenzweig

of see in per Yeah. our this kind current more clients. oriented It's seasonal launches clients -- some new our in for some And by you'll involves of varied and hiring I well. strong strong areas region. sales bit within it's would that there same-store retail of base, as quarter of se installed a little and that a And regions growth is of it say in other

Unidentified Analyst

Okay, got you.

StarTek's Okay. entirely the your things I I about prior something maybe that And that on add wondering so maybe do can specifically, market business that that to U.K. was that market sales the the something pipeline during for to Philippine with market you some for it U.S. was the is -- some the your color. call, explained Philippines business. you you saw for now focus during given could had there's what talk merger

Lance Rosenzweig

just our Philippines. absolutely with thrilled the in We're Yeah. performance

both are killing as just business we're international well And areas provincial more We there. and the in well. the seeing sites teams as in Manila, as flowing it. the Philippines more have metro into several We're

location the to the addition in as been pretty exclusive So for much has U.S., mentioned services had -- which you past. in correctly the

that great We the where we are to and also to the outsource a a operations and Australian U.K. opportunities we've were for of now growth Australian leading done seeing our think as Philippines from well. some brands recently on the focus restructuring there

are more those to international we seeing campuses. diversification So

Unidentified Analyst

Beautiful.

extent talk taken you can that? to you you about the that going you for to also picture steps growth maybe have how internally the within profitable see Okay. forward? the you forming incentivize team sales revenue And of what Could

Lance Rosenzweig

a multifaceted It's Yeah. approach.

our are whole caveat So answer off in well-managed taking running operations business. is what I'll the that eye not very we efficient lean and a

some growth It's from So from coming it's that improving driving underlies is lower new top seeing But driving all We're to and we bottom is of utilization, do cost do. growth everything higher margins. strong opportunities And in and clients. we're locations which for clients. some In seeing we coming locations. capacity cost arbitrage both performance. from existing line is opportunities as higher that, cases, improvements that

Unidentified Analyst

business with really desire And transparent Okay, you've rates information in and and process? then comments you tell your foresee at information in maybe to appreciate that shareholders? more do And such your are that. us bit the you releasing and more Can goals, the and when good. little I margin utilization where finally as long-term wins end goals all to mentioned you terms of a be

Lance Rosenzweig

Yeah.

Q geographies ahead to information that and on utilization both some the We that us. excited little make be that's will about we're is The a verticals. Capacity talking super making as for tomorrow are individual out as sure the well consistently good progress opportunity about. trickier and got we're for us individual

in too but want are want it releasing in to looking do where measures internally put of very don't some publicly. be contrast. about to non-GAAP to So are transparent subjectivity do, everything compare metrics much we the other We we and difficult we

that it. our all really on we’re investors. excellent providing quality We want we it, at make looking for are we're sure so information And to

Unidentified Analyst

questions taking going and you forward. luck Great guys. thank very much good Well, my for

great. You're doing

Lance Rosenzweig

you, Thank Omar.

Operator

our now this turn call Mr. the time, concludes Rosenzweig. proceed. over this to Rosenzweig back At session. you. I question-and-answer like Thank please Mr. would to

Lance Rosenzweig

for afternoon your report results. for Thank and annual our quarterly you, you Daniel speaking continued us all on you next with support and forward and you. to of we thank when this Thank joining We look StarTek.

Operator

you Ladies may gentlemen, and now Thank you. disconnect.

Startek (SRT) 8 Nov 192019 Q3 Earnings call transcript