StarTek Inc. (SRT, Financial) filed Quarterly Report for the period ended 2009-03-31.
StarTek Inc. is a global provider of process management services and owns and operates branded vertical market Internet web sites. Their process management service platforms include E-commerce support and fulfillment provisioning management for telecommunications systems high-end inbound technical support and an offering of supply chain management services. As an outsourcer of process management services as its core business StarTek allows its clients to focus on their primary business reduce overhead replace fixed costs with variable costs and reduce working capital needs. StarTek Inc. has a market cap of $87 million; its shares were traded at around $5.87 with and P/S ratio of 0.3.
Cost of services increased by $4.9 million, or 8.8%, from $55.1 million in the first quarter of 2008 to $60.0 million in the first quarter of 2009. Cost of services in the U.S. increased by approximately $8.6 million, of which $6.1 million related to the net addition of new sites year over year, as discussed above. Cost of services at our other U.S. facilities also increased during the first quarter of 2009 compared to the first quarter of 2008 due to a greater number of agents, as described above. In addition, cost of services increased by approximately $2.0 million due to the Makati City, Philippines location. These increases to cost of services were offset by lower cost of services in Canada due in part to the closure of the Regina location, which accounted for $2.2 million of the decrease. Additionally, gross margin improved in Canada from the stronger U.S. to Canadian dollar exchange rate. Our effective exchange rate of Canadian to U.S. dollars, net of hedges, improved from 1.00 in the first quarter of 2008 to 1.11 in the first quarter of 2009 lowering our cost of services by approximately $2.0 million. The remaining decrease in the Canadian segment was due to fewer agents, as described above.
Selling, general and administrative expenses decreased by $0.4 million, or 3.9%, from $10.1 million in the first quarter of 2008 to $9.7 million in the first quarter of 2009. The decline was due primarily to decreases in hiring and other personnel expense of approximately $0.3 million, decreased salaries of $0.3 million, lower commission expense of $0.2 million and less depreciation expense of $0.2 million. These decreases were partially offset by increases in legal expenses of approximately $0.2 million related to the negotiation of new customer contracts and greater bonus expense of $0.4 million.
Income from discontinued operations was approximately $4.6 million during the first quarter of 2009 and approximately $0.1 million during the first quarter of 2008. In February 2009, we sold Domain.com, a wholly-owned subsidiary, for cash of approximately $7.1 million. We had a gain on the sale of approximately $6.9 million, less taxes of approximately $2.3 million.
Operating Activities. Net cash provided by operating activities was $4.9 million for the three months ended March 31, 2009, an increase of approximately $7.9 million from cash used in operations of $3.0 million for the three months ended March 31, 2008. Net cash provided by operating activities from continuing operations was $7.2 million, or an increase of $10.2 million. Cash provided by operating activities increased by approximately $9.7 million for the three months ended March 31, 2009 compared to the same period in 2008 due to greater collections of accounts receivable. Our accounts receivable balance can change significantly period to period because the majority of our billings occur monthly with large customers, whereby, the timing of collections on those receivables can result in significant fluctuations in our accounts receivable balance. In addition, cash provided by operating activities increased by $3.2 million from larger accrued liabilities (primarily due to increased accrued restructuring costs). Refer to Results from Operations Three Months Ended March 31, 2009 and March 31, 2008 above for further information on the impairment losses and restructuring charges. These increases to cash provided by operating activities were partially offset by a $3.6 million increase in net loss from continuing operations, which included a $1.8 million non-cash impairment loss, and a decrease of $1.0 million in accounts payable due to the timing of purchases and payments.
Financing Activities. Net cash used in financing activities was $0.8 million in the first quarter of 2009, compared to net cash provided by financing activities of $0.4 million in the first quarter of 2008. The cash used in financing activities during the first quarter of 2009 was due primarily to payments on our borrowings. In 2008, we had net cash provided by financing activities due to net proceeds on our line of credit of $1.7 million, offset by $1.3 million of payments on our borrowings.
Read the The complete Report
StarTek Inc. is a global provider of process management services and owns and operates branded vertical market Internet web sites. Their process management service platforms include E-commerce support and fulfillment provisioning management for telecommunications systems high-end inbound technical support and an offering of supply chain management services. As an outsourcer of process management services as its core business StarTek allows its clients to focus on their primary business reduce overhead replace fixed costs with variable costs and reduce working capital needs. StarTek Inc. has a market cap of $87 million; its shares were traded at around $5.87 with and P/S ratio of 0.3.
Highlight of Business Operations:
Revenue increased by $6.1 million, or 9.5%, from $64.6 million in the first quarter of 2008 to $70.7 million in the first quarter of 2009. The increase was driven by the U.S. segment and the Offshore segment which increased by $9.4 million and $2.2 million, respectively. The increase in U.S. revenue was due to three new U.S. facilities added in 2008, offset by the closure of two U.S. facilities. The net impact of these openings and closings was $6.3 million in additional revenue. The remaining increase of $3.1 million at the remaining U.S. facilities was driven by an increase in the number of average full-time equivalent agents, which increased approximately 10.5% from the first quarter of 2008 to the first quarter of 2009. The offshore facility in Makati City, Philippines opened in September 2008, and as such did not contribute revenue during the first quarter of 2008. Of the $2.2 million of revenue generated from the Philippines during the first quarter of 2009, approximately $0.4 million related to one-time training revenue. Revenue from Canada decreased by $5.4 million in the first quarter of 2009 compared to 2008 due primarily to the closure of our Regina, Saskatchewan facility in February 2009 which had approximately $2.3 million less revenue in 2009 compared to 2008. In addition, revenue decreased by approximately $0.3 million due to changes in the foreign exchange rate between the U.S. dollar and Canadian dollar. The remainder of the decrease in the Canadian segment was due to a decrease in the number of average full-time equivalent agents, which decreased by approximately 15.2% in the first quarter of 2009 from the first quarter of 2008.Cost of services increased by $4.9 million, or 8.8%, from $55.1 million in the first quarter of 2008 to $60.0 million in the first quarter of 2009. Cost of services in the U.S. increased by approximately $8.6 million, of which $6.1 million related to the net addition of new sites year over year, as discussed above. Cost of services at our other U.S. facilities also increased during the first quarter of 2009 compared to the first quarter of 2008 due to a greater number of agents, as described above. In addition, cost of services increased by approximately $2.0 million due to the Makati City, Philippines location. These increases to cost of services were offset by lower cost of services in Canada due in part to the closure of the Regina location, which accounted for $2.2 million of the decrease. Additionally, gross margin improved in Canada from the stronger U.S. to Canadian dollar exchange rate. Our effective exchange rate of Canadian to U.S. dollars, net of hedges, improved from 1.00 in the first quarter of 2008 to 1.11 in the first quarter of 2009 lowering our cost of services by approximately $2.0 million. The remaining decrease in the Canadian segment was due to fewer agents, as described above.
Selling, general and administrative expenses decreased by $0.4 million, or 3.9%, from $10.1 million in the first quarter of 2008 to $9.7 million in the first quarter of 2009. The decline was due primarily to decreases in hiring and other personnel expense of approximately $0.3 million, decreased salaries of $0.3 million, lower commission expense of $0.2 million and less depreciation expense of $0.2 million. These decreases were partially offset by increases in legal expenses of approximately $0.2 million related to the negotiation of new customer contracts and greater bonus expense of $0.4 million.
Income from discontinued operations was approximately $4.6 million during the first quarter of 2009 and approximately $0.1 million during the first quarter of 2008. In February 2009, we sold Domain.com, a wholly-owned subsidiary, for cash of approximately $7.1 million. We had a gain on the sale of approximately $6.9 million, less taxes of approximately $2.3 million.
Operating Activities. Net cash provided by operating activities was $4.9 million for the three months ended March 31, 2009, an increase of approximately $7.9 million from cash used in operations of $3.0 million for the three months ended March 31, 2008. Net cash provided by operating activities from continuing operations was $7.2 million, or an increase of $10.2 million. Cash provided by operating activities increased by approximately $9.7 million for the three months ended March 31, 2009 compared to the same period in 2008 due to greater collections of accounts receivable. Our accounts receivable balance can change significantly period to period because the majority of our billings occur monthly with large customers, whereby, the timing of collections on those receivables can result in significant fluctuations in our accounts receivable balance. In addition, cash provided by operating activities increased by $3.2 million from larger accrued liabilities (primarily due to increased accrued restructuring costs). Refer to Results from Operations Three Months Ended March 31, 2009 and March 31, 2008 above for further information on the impairment losses and restructuring charges. These increases to cash provided by operating activities were partially offset by a $3.6 million increase in net loss from continuing operations, which included a $1.8 million non-cash impairment loss, and a decrease of $1.0 million in accounts payable due to the timing of purchases and payments.
Financing Activities. Net cash used in financing activities was $0.8 million in the first quarter of 2009, compared to net cash provided by financing activities of $0.4 million in the first quarter of 2008. The cash used in financing activities during the first quarter of 2009 was due primarily to payments on our borrowings. In 2008, we had net cash provided by financing activities due to net proceeds on our line of credit of $1.7 million, offset by $1.3 million of payments on our borrowings.
Read the The complete Report
