INVESTOR PRESENTATION. March 2017

Transcription

1 INVESTOR PRESENTATION March

2 Important Cautions Regarding Forward-Looking Statements This presentation contains forward-looking statements, 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 these projections. STARTEK advises all recipients of these materials to review the 2016 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. This presentation is copyright 2017 STARTEK, Inc. All rights reserved. 2

3 Who We Are STARTEK is a provider of comprehensive customer engagement and business process outsourcing (BPO) services We are Brand Warriors specializing in orchestrating the ideal customer experience at the point of conversation We serve nine major industries, including financial services, healthcare, technology, cable & media, telecom and retail We employ 14,000 brand warriors across the world providing services like customer care, technical support, receivables management and order processing 3

4 We Address a Large & Growing BPO Market We address a $70+ billion Customer Care BPO marketplace¹ Customer Care BPO Market Size¹ This market is projected to grow at a 5% CAGR through 2019¹ BPO penetration is low but growing only ~25% of companies outsource contact center services (up from 20%)² $68B $72B $77B $82B $86B Highly fragmented industry five largest companies serve < 20% of the market Brands are looking for more effective ways to engage with customers 2015E 2016E 2017E 2018E 2019E 1) Based on estimate calculations from IDC Report 2) IDC, May

5 BPO & Customer Engagement Market Continues to Evolve Today s Marketplace Tomorrow s Marketplace High touch and convenient engagements Requires fully functional omni-channel support, with special attention to mobile Your customer is in charge Your customer will interact with you on their terms Traditional call center phone service is only one component of a solid foundation in servicing your customer Security and Privacy Protection will be Assumed Table Stakes 1) Accenture BPO research and STARTEK estimates. 5

6 Why STARTEK 6

7 Moving Towards a More Diversified & Balanced Business Model 8 Major Verticals Served Improved Diversity High-Growth Verticals Telecom Cable & Media Wireless Technology Retail Financial Education Healthcare Other 2014 Revenue = $250M Telco 62% Wireless 40% Other 6% Telco 12% Cable & Media 28% 2016 Revenue = $307M Healthcare 4% Cable & Media 25% Wireless Revenues $97.0M FY-15 $25.3M Retail Revenues $122.5 M FY-16 $33.8M Other 5% Financial 3% Healthcare 3% Retail 11% FY-15 FY-16 7

8 Healthy Footprint Built for Growth 8

9 Growth Drivers Pipeline Conversion Emerging Services Healthcare Vertical Customer Engagement Conversion of sales pipeline will continue to diversify client concentration and revenue mix Reduced Top Three Client Concentration (as % of total revenue) For 2016, STARTEK won $54 million of annual contract value (ACV) in new business Appointed new Chief of Sales & Marketing in June 2016 Q4 16 Added $11.1 million new business 82% 70% 73% 69% 48% 52% Significant contribution margin every 5% increase in capacity utilization leads to: +150 bps gross margin +180 bps Adj. EBITDA margin

10 Growth Drivers Pipeline Conversion Emerging Services Healthcare Vertical Customer Engagement Leverage Ideal Dialogue and ACCENT to enhance customer experience and business analytics Receivables management Emerging Services Revenue¹ $49.1M $64.6M Back office (non-voice) CCaaS (Contact Center as a Service) BPaaS (Business Process as a Service) These services generate higher margins than our core business and command higher multiples FY-15 FY-16 1) Emerging Services revenues include receivables management, IT, IDC and back office. 10

11 Growth Drivers Pipeline Conversion Emerging Services Healthcare Vertical Customer Engagement At 53%, Healthcare BPO Market Expected to Outgrow All Other Verticals Serving the needs of providers, med device, and pharma companies as well as payers Licensed in 49 states to provide receivables management for clients Clinicians providing tele health services: $9B $7B $5B $3B Telco, 31% Retail, 29% Media, 27% Utilities, 27% Healthcare, 53% Post-discharge management Emergency room triage Remote patient monitoring $1B '12 '13 '14 '15 '16 '17 '18 Education, 23% 11

12 Growth Drivers Pipeline Conversion Emerging Services Healthcare Vertical Customer Engagement STARTEK is transforming the BPO industry with customer engagement solutions powered by analytics & insight Engagement Support across all channels Journey Mapping to eliminate friction Data-Sharing Analytics & Insight to orchestrate ideal brand experience 12

13 FINANCIAL HIGHLIGHTS

14 Key Stats Trading Data February 27, 2017) Stock Price $ Week Low/High $3.74/9.80 Avg. Daily Vol. (3 mo.) 59,440 Shares Outstanding 15.7M Public Float, est. 70% Institutional Holdings 56% Insider Holdings 21% Valuation Measures Market Cap $143.5M Enterprise Value $177.8M EV/Revenue (ttm) 0.6x EV/Adj. EBITDA (ttm) 10x Financial Highlights December 31, 2016) Revenues (ttm) $307.2M Adj. EBITDA¹ (ttm) $17.0M Cash & Equivalents (mrq) $1.0M Total Assets (mrq) $106.8M Total Debt (mrq) $34.3M Total Liabilities (mrq) $62.1M Total Equity (mrq) $44.7M Source: Capital IQ and company data. 1) See appendix for use of non-gaap information. 14

15 Turnaround Complete, Returning to Growth In 2011, we initiated a strategy to close underperforming sites, improve utilization & control costs to improve operating leverage. Revenue and SG&A % 15.0% $282.1M $307.2M $198.1M $231.3M $250.1M 12.5% 12.6% 12.2% 10.8%

16 IT Transformation STARTEK Connect STARTEK Connect is our cloud-based IT platform launched in Q2-15 Variable cost model and capital light Delivers virtualized applications & hardware Enhances speed to market (value beyond cost) 14.4% $198M IT Costs Continue to Decline as a Percentage of Revenue $231M 12.5% $250M $282M 11.6% 11.8% $307M Eliminates transition points Reduced cost per seat by 40% since % Further scale is expected to continue this cost reduction trend Revenue Total IT as % Revenue 16

17 Revenue & Gross Margin by Region Domestic Offshore Nearshore Capacity investments muting revenue & margin growth near-term $186M Operational efficiencies driving improved utilization Capacity improvements & labor efficiencies offset by 14 Costa Rica closure $170M $86M $80M $81M $73M $77M $39M $44M $131M $34M $121M $29M $100M $19M Gross Margin 7.4% 11.0% 9.9% 6.8% 6.7% Gross Margin 20.7% 12.3% 17.7% 9.2% 21.6% Gross Margin N/A 3.6% 6.9% 15.3% 16.8% 17

18 Cash Flow Trends Improving Adjusted EBITDA $17.0M $7.9M $9.6M $11.5M $3.9M $4.6M -$3.8M Adjusted EBITDA Margin 1.5% N/A 4.0% 4.2% 4.6% 1.6% 5.5% 18

19 Balance Sheet $1.0M cash $26.0M outstanding on revolving credit facility (max availability of $50M) $27.4M deferred net tax assets at Dec 31, 2016 (offset by full valuation allowance) Select Balance Sheet Items $ Millions Dec 31, 2016 Dec 31, 2015 Cash & equivalents $1.0 $2.6 Receivables Total assets Total debt Total liabilities Total stockholders equity

20 SRT Key Takeaways Omni-channel value-add services. A fresh approach in the BPO industry through customer engagement delivers a stronger value proposition to clients. We are Brand Warriors! Strategic investments advancing scale. Capacity and improved IT platform supports future growth and profitability. Improved diversity. Emerging BPO sectors command higher margins, support higher multiples. Return to growth and profitability. Right-sizing the organization with a focus on utilization and diversified revenue to drive free cash flow and pay down debt. 20

21 CONTACT INFORMATION STARTEK, Inc E. Maplewood Ave, Suite 100 Greenwood Village, CO INVESTOR RELATIONS Liolios Cody Slach or Sean Mansouri

22 APPENDIX

23 STARTEK Case Study Customer Affairs What started as an initiative to consolidate and improve consumer affairs calls evolved into a critical enterprise-wide strategy to: Identify revenue opportunities and increase conversion Deliver cost savings through elimination of inefficiencies Improve service delivery and increase satisfaction Provide an objective voice of the Boss Drive cross-functional transformational organizational change Cost Per Contact dropped from $13.19 with previous vendors to $5.54 with STARTEK Yearly Spend decreased from $2.3M to $1.8M Serve as a trusted strategic partner -23% +25% 52% +3,806% +50% +86% -58% 2014 SPEND PHONE SELF SERVICE CHAT ALL CONTACTS COST PER SELF SERVICE ALL CONTACTS

24 Competitive Landscape The industry has undergone recent consolidation, with the larger players acquiring smaller firms Competitive Landscape Highly fragmented industry five largest companies serve < 20% of the market Unique STARTEK differentiators Trusted sourcing enables client acquisition and retention Focus on customer experience and a proactive approach to understanding clients Customer engagement model aligns omnichannel capabilities and creates new revenue opportunities for clients 24

25 Customer Engagement Natural Progression Forecast Forecast performance based on data correlations and predictive modeling Monitor Systematically monitor for key activities and events influencing performance Forecast Monitor Customer Engagement Data Drives Informed and Actionable Decisions Mine Mine both internal and external data for correlations influencing outcomes, costs and other KPIs Mine Analytics & Insights Operationalize Drive data into operational decision making Operationalize Report Analyze Track performance against strategy driven KPIs and industry benchmarks Analyze Report Run historical reports to understand and track your success 25

26 Relationship Building Tools Our suite of engagement solutions infuses the principles of dialogue across all aspects of the customer experience and provides you with everything needed to maximize customer satisfaction, sales and retention as a result of every conversation. 26

27 Non-GAAP Measures This presentation may contain certain non-gaap financial measures including Adjusted EBITDA. A reconciliation of this non-gaap measure to its comparable GAAP measure is included in this presentation. This non-gaap information should not be construed as an alternative to the reported results determined in accordance with GAAP. It is provided solely to assist in an investor s understanding of these items on the comparability of the Company s operations. The Company defines non-gaap Adjusted EBITDA as net income (loss) plus income tax expense (benefit), interest expense (income), impairment losses and restructuring charges, depreciation and amortization expense, (gains) losses on disposal of assets and share-based compensation expense. Management uses Adjusted EBITDA as a performance measure to analyze the performance of our business. Management believes that excluding these non-cash and other non-recurring items helps investors and analysts assess the strength and performance of our ongoing operations. Management believes that the measures that exclude impairment losses and restructuring charges or other non-recurring items permit a more meaningful comparison and understanding of our operating performance for the current, past or future periods. 27

28 Adjusted EBITDA Reconciliation $ in thousands Net income/(loss) (19,383) (26,462) (10,488) (6,406) (5,460) (15,616) 395 Income tax (benefit) expense 1,244 (126) Interest expense (income), net (56) (25) (8) ,683 1,574 Impairment losses and restructuring charges, net 2,835 5,496 4, ,965 3, Depreciation and amortization expense 17,155 15,750 12,957 12,527 10,379 13,261 12,250 (Gains) losses on disposal of assets ,549 (136) (509) (3.0) Share-based compensation expense 2,108 1,602 1,275 1,607 1,625 1,469 1,722 Adjusted EBITDA $ 3,903 $ (3,765) $ 7,918 $ 9,627 $ 11,543 $ 4,642 $ 17,020 28