February 25, 2016 - 6:50pm EST by
2016 2017
Price: 4.50 EPS .20 0
Shares Out. (in M): 16 P/E 22 0
Market Cap (in $M): 70 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 70 TEV/EBIT 0 0

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  • Professional Services
  • Revenue Transition
  • Insider Buying



Startek (SRT) is an old Value Board story probably well known to many on VIC.


Best known as a telephone contac center, it has morphed into a business process


outsourcing services operating out of United States, Latin America and Asia-Pacific.


SRT provides sales, order management, customer care, technical  and


product support , receivable management, inbound sales as well as complex order


processing. Inbound help desks offer technical and product support via phone,


internet, fax, email, chat and social media. Upselling and cross selling, lead generation


as well as direct selling are all included in their portfolio of services.




Services to wireless, data, and telco companies are quite extensive and include


telephone backup to automated calls, order processing and transfer of accounts


between client service providers, and receivable management of course consists of


collections for clients across many industries including media, cable, healthcare


and telecommunications. One of the newest segments is healthcare which includes


remote patient care, customer care, sales support and medical triage to payers,


providers, drug and device manufacture companies.




The “old” Startek  had its ups and downs but the fourth quarter just reported


 seems to suggest and important change has occurred. The street consensus


 for the quarter was a loss of $0.08 but SRT surprised with a profit of $0.02.




While not earth shattering by itself but with the background facts and commentary,


a  “turn in the tide” is suggested.




The long time knock on the company was that just four customers accounted for almost


all of the revenues- certainly not in inconsequential issue. ATT alone in 2010 accounted


for 66% of sales-now under 10%. Startek just reported now having 58 clients in the


now core business and in Startek Health an additional 210 clients. Thus SRT has


greatly changed its corporate profile.




Probably historically best know for its relationship with T Mobile which was recently


rated by J.D.Powers in a  “2016 US Wireless Customer Care Performance Study”


with the highest ranking among full service carriers responding to customers calls.


The transformation from a narrowly focused telco provider to a broadly diversified


customer care service provider has attracted many new clients in new industry sectors.


In addition to a wide ranging healthcare vertical, we have a financial services sector


as well as a newly expanded receivables management business.




What is important to bear in mind is that the original core business of customer center


contact is lower margin, and competitive, the new verticals more are more profitable and


less contentious. The more mature telecommunications area may be near a renaissance,


However, with cellular companies betting heavily on 5g service as their next money


maker. Mobile speeds will dramatically increase and require a great deal of


customer service on introduction and implementation. Currently beginning initial


trials, ATT and Verizon expect this to be a major homerun.




Total revenues for 2015 was $282 million up from $250 million while gross margins


fell to 8.6% from 12.2% due to excessive cost overruns in capacity and delayed


contract wins. A mismatch of seats and geographies has been remedied with the closing


of several sites.




The recently released fourth quarter demonstrates better times ahead. Total revenues


for the fourth quarter were $82.3 million up some 28% from $62.3 million largely


attributable to an acquisition on June 1  as well a new client wins and


organic growth.




Revenues from the Healthcare, financial services and retail verticals


surged 135% to $26.3 million versus the same time last year and represented one-third


of total sales compared to 17% last year while adjusted ebidta jumped 106% to $4.8


 million compared to prior year. Net income turned profitable $0.3 million or


$0.02 compared to a loss of $1.6 million or ($0.10) adding two new clients in quarter


and $10 million of new revenues.




For the full year, Startek signed 14 new clients adding $22 million in revs.


On a go forward basis, they are specifically targeting new verticals with higher


margins with a goal of achieving double digit growth and profitability this year.




Current indications for the full year suggest a 10% increase in sales to $280 million


and an ebidta of $20 million. Since comps trade at over five times ebitda we could have


a stock trading at over $7. And, of course, if it all comes together –  higher.




Three insiders seem to be enthusiastic of the prospects with open market buys over the


last three months.












































I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.





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