srt20220331_10q.htm

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

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

For the quarterly period ended March 31, 2022

☐

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

For the transition period from to

Commission file number 1-12793

Startek, Inc.

(Exact name of registrant as specified in its charter)

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

4610 South Ulster Street,
Suite 150, Denver, Colorado	80237
(Address of principal executive offices)	(Zip code)

(303) 262-4500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	SRT	New York Stock Exchange, Inc.

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

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

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

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April 28, 2022, there were 40,296,021 shares of Common Stock outstanding.

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STARTEK, INC. AND SUBSIDIARIES

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FORM 10-Q

PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	Page
	Consolidated Statement of Income (Loss) and Other Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	4
	Consolidated Balance Sheets as of March 31, 2022(Unaudited) and December 31, 2021	5
	Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	6
	Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	7
	Note 1 Overview and Basis of Preparation	8
	Note 2 Summary of Significant Accounting Policies	9
	Note 3 Goodwill and Intangible Assets	12
	Note 4 Revenue	13
	Note 5 Net Income / (Loss) Per Share	15
	Note 6 Impairment Losses and Restructuring / Exit cost	15
	Note 7 Derivative Instruments	16
	Note 8 Fair Value Measurements	17
	Note 9 Debt	18
	Note 10 Share-Based Compensation	20
	Note 11 Accumulated Other Comprehensive Loss	21
	Note 12 Segment Reporting	22
	Note 13 Leases	23
	Note 14 Investment in Equity-Accounted Investees	24
	Note 15 Common Stock	25
	Note 16 Private Offer Transaction Cost	26
	Note 17 Subsequent Events	26
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	31
ITEM 4.	Controls and Procedures	31

PART II - OTHER INFORMATION

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

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

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

•

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

•

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

•

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

•

other statements regarding matters that are not historical facts.

Our business and results of operations are subject to risks and uncertainties, many of which are beyond our ability to control or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by forward-looking statements, and investors are cautioned not to place undue reliance on such statements, which speak only as of the date thereof. Important factors that could cause actual results to differ materially from our expectations and may adversely affect our business and results of operations, include, but are not limited to, those items described herein or set forth in the Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on March 14, 2022 and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. Unless otherwise noted in this report, any description of "us," "we," or "our," refers to Startek, Inc. ("Startek") and its subsidiaries.

CHANGE IN FILING STATUS

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

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

	*Three Months Ended March 31,*
	*2022*			*2021*
Revenue		167,317			163,495
Warrant adjustment		-			(425	)
Net revenue	$	167,317		$	163,070
Cost of services		(146,260	)		(138,383	)
Gross profit	$	21,057		$	24,687

Selling, general and administrative expenses		(15,881	)		(14,171	)
Impairment losses and restructuring/exit cost		(1,407	)		(1,898	)
Operating income	$	3,769		$	8,618

Share of loss of equity-accounted investees		(8	)		(14	)
Interest expense, net and other income		(974	)		(13,769	)
Foreign exchange gains (losses), net		(408	)		212
Income (loss) before tax expense	$	2,379		$	(4,953	)
Tax expenses		(2,093	)		(4,902	)
Net income (loss)	$	286		$	(9,855	)

Net income (loss)
Net income attributable to noncontrolling interests	$	1,529		$	2,300
Net loss attributable to Startek shareholders	$	(1,243	)	$	(12,155	)

Net loss per common share
Basic net loss attributable to Startek shareholders	$	(0.03	)	$	(0.30	)
Diluted net loss attributable to Startek shareholders	$	(0.03	)	$	(0.30	)

Weighted average common shares outstanding
Basic		40,338			40,592
Diluted		40,338			40,592

STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

	*Three Months Ended March 31,*
	*2022*			*2021*
Net income (loss)	$	286		$	(9,855	)
Net income attributable to noncontrolling interests		1,529			2,300
Net loss attributable to Startek shareholders		(1,243	)		(12,155	)

Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments		548			(1,092	)
Change in fair value of derivative instruments		-			8
Pension amortization		(1,137	)		(384	)
Other comprehensive loss	$	(589	)	$	(1,468	)

Other comprehensive income (loss), net of taxes
Other comprehensive loss attributable to non-controlling interests		(655	)		(69	)
Other comprehensive income (loss) attributable to Startek shareholders		66			(1,399	)
	$	(589	)	$	(1,468	)
Comprehensive income (loss)
Comprehensive income attributable to non-controlling interests		874			2,231
Comprehensive loss attributable to Startek shareholders		(1,177	)		(13,554	)
	$	(303	)	$	(11,323	)

See Notes to Consolidated Financial Statements.

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STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands, except share data)

(Unaudited)

	*March 31,*			*December 31,*
	*2022*			*2021*
Assets
Current assets
Cash and cash equivalents		43,302			47,940
Restricted cash		8,946			7,456
Trade accounts receivables, net		85,542			106,937
Unbilled revenue		67,266			50,074
Prepaid and other current assets		17,720			12,611
Total current assets	$	222,776		$	225,018

Non-current assets
Property, plant and equipment, net		32,332			34,168
Operating lease right-of-use assets		59,299			63,012
Intangible assets, net		87,531			90,092
Goodwill		183,397			183,397
Investment in equity-accounted investees		31,680			31,688
Deferred tax assets, net		4,731			3,664
Prepaid expenses and other non-current assets		10,805			11,436
Total non-current assets	$	409,775		$	417,457
Total assets	$	632,551		$	642,475

Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payables		8,169			11,916
Accrued expenses		53,706			53,203
Short term debt		3,535			3,611
Current maturity of long term debt		10,216			6,241
Current maturity of operating lease liabilities		24,052			24,393
Other current liabilities		44,236			48,265
Total current liabilities	$	143,914		$	147,629

Non-current liabilities
Long term debt		155,771			160,175
Operating lease liabilities		40,745			44,263
Other non-current liabilities		21,563			19,562
Deferred tax liabilities, net		18,244			17,526
Total non-current liabilities	$	236,323		$	241,526
Total liabilities	$	380,237		$	389,155

Stockholders’ equity:
Common stock, 60,000,000 non-convertible shares, $0.01 par value, authorized; 40,953,221 and 40,893,396 shares issued as of March 31, 2022, and December 31, 2021, respectively		410			409
Additional paid-in capital		292,104			291,537
Accumulated deficit		(85,286	)		(84,043	)
Treasury stock, 672,176 and 412,769 shares as of March 31, 2022, and December 31, 2021, respectively, at cost		(3,183	)		(1,912	)
Accumulated other comprehensive loss		(10,621	)		(10,687	)
Equity attributable to Startek shareholders	$	193,424		$	195,304
Non-controlling interests		58,890			58,016
Total stockholders’ equity	$	252,314		$	253,320
Total liabilities and stockholders’ equity	$	632,551		$	642,475

See Notes to Consolidated Financial Statements.

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STARTEK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

	*Three Months Ended March 31,*
	*2022*		*2021*
Operating Activities
Net income (loss)	$	286	$	(9,855

SEC Form 10-Q filed by StarTek Inc.