Startek Inc (SRT) 2012 Q4 法說會逐字稿

Good morning, everyone, and thanks for calling in. It's my pleasure to welcome everyone to StarTek's fourth-quarter 2012 earnings call. I'm joined on the call today by StarTek's President and Chief Executive Officer, Chad Carlson, and Chief Financial Officer Lisa Weaver.

Chad will deliver some brief commentary today. At the conclusion of Chad's prepared remarks, Chad and Lisa will conduct a question-and-answer session.

For those of you who have not yet received a copy of today's earnings press release, please go to www.StarTek.com where you can download a copy from the investor section of their website.

Please note 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 vary materially from those projections.

StarTek advises all these listening to the conference to review the 2011 Form 10-K posted on their website for a summary of these risks and uncertainties. StarTek does not undertake the responsibility to update these projections.

Further, the discussion today includes some non-GAAP measures. In accordance with Regulation G, the Company has reconciled these amounts back to the closest GAAP basic measurements. These reconciliations can be found in the earnings release on the investor page of their website.

I'll now turn the call over to Chad Carlson, StarTek's President and CEO. Please go ahead.

Thank you, Carolyn, and good morning, everyone.

We continue to make progress against our goal to achieve sustainable, predictable, profitable growth. The fourth quarter was our first profitable quarter in three years and we are well positioned for future growth.

In the fourth quarter, our revenue increased 15.6% sequentially to $55.1 million, up from $47.7 million in third quarter. This was a combination of the ramp of new business booked earlier in the year and strong seasonal volumes from existing clients.

I am pleased to say that this growth took place across each one of our geographic segments.

We managed higher capacity utilization, which drove nice improvements in our operating results, as evidenced by a 15% gross margin, almost double the 7.7% result in fourth quarter of 2011.

Our gross margin was weaker in the Philippines, due to a combination of ramped training and performance challenges on a few programs, which we are addressing aggressively.

SG&A remained relatively stable and handling this growth, as various G&A savings initiatives allowed us to make some investments in key leadership positions. As we continue to invest in growth, we will be very mindful of managing our fixed expenses.

All these variables combined to produce a net income of $1.2 million for fourth quarter, or $0.07 per diluted share.

As expected, our cash position remained flat in the third quarter at $9.2 million. The use of working capital in the fourth quarter was driven by an increase in accounts receivable and other working capital to support continuing ramps, as well as the planned payout of accrued employee benefits offshore.

We are pleased that we achieved our goal of exiting 2012 a much healthier company. We have a stronger bottom line, improved client and geographical diversification, and a stronger leadership team.

That said, we have a lot of work remaining to complete our turnaround story. We are progressing on our IT platform initiative and like our options. We will continue to be very diligent and thoughtful in our planning and decision making.

We remain intensely focused on execution, and the team is building a new logo momentum in our pipeline with a rebuilt sales organization. We are confident in the overall trends and momentum and look forward to completing some of these key initiatives over the next few quarters.

Carolyn, Lisa and I will now take questions.

(Operator Instructions). [Omar Samalot], [Independent Analyst Corp.].

Good morning, guys.

Good morning.

Good morning.

Congratulations again. You guys have become masters of underpromising and overdelivering. It's amazing.

I just wanted to ask about the $69 million in new contract value. Is that for up to what period? Is that for year ending 2012 or does it include 2013?

Year ending 2012.

Okay. On the SG&A line, are you guys expecting a pickup as you grow your sales, given the momentum that you're experiencing?

We're still working through the IT initiatives, Omar, which could give us some benefit there, but right now our commissions are within G&A reporting. So, it could have some effect there.

Okay. In November, you guys announced a doubling of the FTEs in your Lynchburg facility. Can you talk about how that came about? Was it performance related?

No, it was part of the new bookings.

Okay. But was it because you had good performance for the existing client or was it a new client?

It was a new program with a different division of an existing logo.

Okay, got it. Given the gross profit shown for Latin America, your Honduras location must have experienced an aggressive ramp-up. Can you talk a little bit about that?

We've continued to ramp steadily. We did take on more real estate there, which was in line with our agreements and commitment as we phased some of that extra capacity in. And we're pleased with our overall performance out of Honduras.

Okay, great. Thank you very much and congratulations again.

Thank you, Omar.

(Operator Instructions). [Bill Gordon], [Gordon Capital].

Good morning.

Good morning.

Good morning.

Can you give me a little idea as to what's going on in the different industry segments? I mean, we've in the past talked about moving into other new areas. How's that going? How's that evolving? And what new areas are we looking at or are we making progress in these areas?

Bill, I'm hesitant to get into that because a lot of times competitors listen to these calls. But we will continue our focus to expand into other verticals and diversify our revenue and geographical base.

Okay. The Economist had an article on call centers, and they said basically the India model is dying, and it would suggest the arbitrage is no longer that important or Americans like to speak to Americans.

How is that showing up in terms of the work you do, whether it is in Honduras or Philippines or wherever else? In other words, are we seeing that it's an important driver? Is it the arbitrage, the money difference, not that important? I'm noticing that we're reopening stuff in America. Is the driver the inconsequentialness of the course? Is it the language, or what?

It's all very client dependent and what that particular client's strategy and focus is at that point in time. So we need to be in the business of providing services where clients desire those and we'll be in a position to offer diversity in those solutions. But it's very client dependent.

What is the basic advantage that we have or don't have compared to the competition at this point, as you would see it?

I think we've invested a lot in building up our StarTek Advantage System, which is basically -- from a client-focused perspective, it has a strong baseline of foundation fundamentals. We refer to it as our StarTek operating platform.

And then, we're also in a position to be very custom in solution orientation for our clients, and then offer value on a year-over-year basis.

One last question, seasonality. What kind of seasonality should we be expecting? Do you see it just growing over the quarters or is there some sort of seasonality that we should anticipate?

Yes, historically this industry typically does see some seasonality, with peak being more fourth quarter, maybe early first quarter, depending on the holiday season and depending on your client mix and whether it's very consumer oriented or business oriented.

And StarTek has some fair diversification in that we have some client offerings that are consumer focused and some that are more B2B, which creates a couple bumps in our overall period.

Okay, thank you much.

(Operator Instructions). (Multiple speakers) no questions. Yes, we have no questions coming in for you, Chad.

All right. Thank you, everybody, and we'll talk to you next quarter and we'll get back to work.

Thank you, Chad.

Thank you.

Thank you, participants, in today's call. Everybody, that concludes your presentation. You may now disconnect.