Q3 2021 Startek Inc Earnings Call
Good afternoon, good afternoon, everyone and thank you for participating in today's conference call to discuss <unk> financial results for the third quarter ended September 30, 2021.
Joining us today, our starplex executive Chairman and global CEO, Apart and Gupta, the company's CFO, because silica and the company's president Bartow.
Following their remarks, we'll open the call up for your questions before we continue we'd like to remind all the participants 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 based on information currently available to us and are subject.
Various risks and uncertainties that could cause actual results to differ materially.
Starting to think advises all those listening to this call to review the latest 10-Q and 10-K posted on its website for a summary of these risks and uncertainties.
So I think the stats undertakes no responsibility to update any forward looking statements.
Further the discussion today may include some non G. P measures in accordance with regulation G. The company has reconciled these have the visa amounts back to the closest GAAP.
A P based measurement there.
The reconciliations can be found in the earnings release on the investors section on their website.
And I would like to remind everyone that the webcast replay for today's call will be available.
Via the investors section of the company's website at Triple double you that star tick Dot Com now I would like to turn the call over to start ex executive Chairman and global CEO approach Sengupta. Please go ahead.
Thank you very much Joseph good afternoon, everyone and thank you for all joining us today's call.
Our third quarter performance demonstrates the progress we have made with driving growth across our core verticals and continuing to strengthen our operational foundation.
We generated year over year increases across both revenues and adjusted EBITDA and sustained our prudent approach to cost management throughout our organization.
On an operational level, we have continued to make key platform enhancements support a global workforce and make key additions to our leadership team.
These efforts have helped us further optimize our platform and maximize our organizational efficiency.
Examining our performance by vertical our growth during the current quarter was primarily driven by our sustained momentum with clients across the telecom banking and financial services.
Technology and it services verticals consistent with the trends. We noted last quarter. These verticals have continued to make a healthy recovery from last year's spend to make related to those.
While the travel and hospitality vertical was down year over year on a revenue basis.
We did see sequential volume improvement relative to last quarter as more geographies stock easing restrictions and have begun gradually reopening.
By geography, we generated meaningful year over year improvements in India, the middle East and South Africa as a result of both our strengthened operations in those regions and our solid recovery from particularly steep pandemic related impacts last year.
By contrast, we experienced some year over year revenue softness in the United States due to disruptions caused by the cybersecurity incident and growing constraints around labor availability and wage pressure.
As we continue to monitor these trends we are placing a strong priority on ensuring we have a robust set of resources for delivering our high quality business process management solutions.
This includes ensuring we have the team members needed to support onshore solutions for certain verticals and continuing to make investments in new digital capabilities for our platform.
Our newly appointed President part of Thrall will be later on our call to discuss the strategy and specific developments in greater depth, but I'm pleased.
With the strong progress we have made to date and look forward to further developing and operational technology. We have consistently demonstrated during a dynamic time for the global copper industry.
Before I turn the call over to our CFO Costa Rica to walk you through our third quarter financial performance as in greater detail I wanted to provide a brief update on our recovery from the cyber security attack, we experienced at the end of Q2.
As a reminder, the threat involved encryption of some of our systems and was contained to just a few specific geographies, mostly impacting agents who are working from home.
We swiftly eradicated the threat and restored the affected agents and clients safe secure access to our platform and I've seen further bolstered our platform security and protection measures to safeguard against similar threat.
Some of the measures we have undertaken to enhance our managed and endpoint detection and response include having a two factor authentication protocol Geo fencing and predictive analytics tool.
In addition, we have also created a 24 seven and cyber security monitoring Command Center.
While the incident did somewhat impact our financial performance during the quarter as the gosh will detail. Shortly the fact that we nevertheless drove year over year top line growth and adjusted EBITDA profitability expansion indicates that our team's tireless commitment and flexibility has helped us create a resilient operation.
And financial Foundation.
This infrastructure has helped us navigate some of the most difficult times, our business and our industry has ever experienced and we plan to continue leveraging our solid platform to deliver secure efficient and exceptional customer experience management solutions across our global client base.
Now I'd like to turn the call over to recast a more detailed overview of our Q3 financial performance the gosh.
Yes, Thanks, Andrew.
Starting on the top line net revenue in Q3 increased 6% to $172 8 million compared to $162 7 million in the year ago quarter.
On a constant currency basis net revenue increased by 7%.
The year ago quarter.
This year over year.
Growth reflects continued strength across key verticals and geographies.
On a nine month basis.
When you increased 13% as compared to the rate of bookings yet.
This is a testimony of the resilience and Malaysian shown by our team to quickly adopt a hybrid model of booking and future proof our business.
This also gives us confidence that we have the capability to handle any disruption that may be caused by COVID-19 and we can now strongly focused on driving growth.
Gross profit for quarter, three was $21 5 million compared to $22 3 million in the year ago quarter.
Gross margin was 12, 5% compared to 13, 7%.
Right.
This decline is primarily attributable to the cybersecurity incident.
We lost 75 basis points.
In addition, gross margin was impacted by the year over year growth, we saw in the telecom financial and business services and public sector verticals that are largely delivered onshore.
We are also closely monitoring the growing wage pressure and labor shortages, particularly in the U S and.
And we will take appropriate measures, including optimizing our infrastructure cost.
Offset any impact from this.
On our overall margin.
Selling general and administrative.
Dnb pushup.
<unk> expenses for Q3 decreased to $14 1 million compared to $14 2 million and we get a good quarter.
As a percentage of revenue SG&A improved 120 basis points to seven 6% compared to eight 8% and they get a good quarter.
This is as a result of continued operating leverage at the back of the higher revenue base.
During the quarter.
We expect to make investments in high performing sales <unk> marketing and digital teams or the next few quarters in order to drive growth and differentiation.
This could result in higher SG&A costs related to our performance.
Having said this we continue to remain guided by our stated objective of achieving sustainable double digit adjusted EBITDA might be.
Net income attributable to stoppage shareholders for Q3 was.
Zero point $1 billion or zero cents per share.
Net income attributable to stock the shareholders, though.
One 4 million or one one cents per share in the year ago quarter.
Adjusted net income attributable to stock the shareholders for Q3.
$2 9 million or seven cents per share.
Compared to an adjusted net income attributable to stop the share holders.
$3 3 million or eight plus years, they get a good quarter.
Adjusted EBITDA in Q3 increased slightly to $15 9 million compared to $13 6 million in the year ago quarter.
As a percentage of revenue adjusted EBITDA was nine 2% compared to nine 6% and they get a good quarter.
During the quarter, we received $2 7 million in government grants compared to one bundle.
Okay.
This helped offset the loss of margin caused by the cyber security incident.
Led by revenue growth.
EBITDA for the nine months increased by 53% as compared to the year ago period.
As a percentage of revenue adjusted EBITDA for the nine month period was 10, 4% compared to six 2% the year ago period.
From a balance sheet perspective at September could be 'twenty, 'twenty, one our cash and restricted cash totaled $63 5 million compared to $4 1 million at June 32021.
With the increase due to improved working capital during this quarter.
Total debt at September 32021, improved to $174 million compared to $173 9 million.
June 32021.
Net debt at September 32021, improved to one or $6 9 million compared to $119 8 million at June 32021.
Our net leverage on a trailing 12 month basis continues to stay well under two X.
And we remain comfortable with the liquidity position as it stands today.
In addition, we purchased an aggregate of 57759 shares of our common stock under our repurchase plan during the third quarter.
We did this at an average cost of <unk>.
$5.67 per share.
This was a testament to our continued confidence in our long term growth prospects as well as our strong execution on these initiatives.
As we progress into the fourth quarter and prepare for 2022, we have maintained our commitment to invest in improving that IP and go to market strategy, including enhancing our sales capabilities and continuing to grow our sales and marketing teams.
We expect these investments combined with the strength extensive security measures put in place to bolster our operational foundation for the quarters ahead.
And we look forward to providing further updates on our growth trajectory.
This concludes my prepared remarks, I will now turn the call over to our company's new precedent, but it though.
So I'm very pleased to formally introduce to all of you today.
But what do you.
Sure. Thank you for your cash.
It is a pleasure to be joining you on today's call.
Well today marks my first earnings call with this topic team as president.
I have been on the company's board since 2018.
Been a managing partner at capital Square partners the companies controlling shareholders.
Through disposition and my past.
Credit Suisse in Asia, Ing's Bank, Pwc and Citibank.
I have gained extensive experience in driving growth and innovation.
And I greatly look forward to leverage this experience to advance strategic initiatives, which I will detail shortly.
I was joined in October by another new appointed two topics executive team.
The company's new global Chief revenue Officer <unk> Shah.
The Nic will lead the global go to market organization, including key client relationships business growth.
Industry specific digital initiatives.
And he brings over 25 years of experience with managing large enterprise clients across technology and business process services.
He will play a critical role in.
Driving starting a new phase of growth.
Building momentum with our focused industry.
Go to market approach.
Strengthening our sales and solution capability and.
Sharpening.
Our market positioning.
Did he makes insights will be invaluable as we drive business growth across new industry segments.
And service lines.
And I greatly look forward to working with him to accelerate our capabilities across the customer experience transformation journey that'd be helpful.
Our appointments come as part of a broader based out of the executive team.
And we'll be surrounded by several other key new appointment and that meant.
To strengthen our leadership in core.
And yes of course.
For instance.
We have recently on boarded a new Chief Digital Officer Avi Jane.
Who will be responsible for overseeing the design launch and promotion of our new customer facing digital solutions.
Expected to make a platform so the suite.
And comprehensive.
We will provide further updates as the Appointment's, Amit, but I am proud of the progress we've made so far.
And honor to experience, a tremendous strength and capability of our management team firsthand.
As we build out our leadership team. We are also increasing our key personnel to support regions and vertical.
They are expressing.
Strong growth trends.
The cash mentioned earlier much of our team build out across our organization.
Will it be concentrated within the sales and marketing.
As we further develop our lead generation.
Digital solution and capabilities and brand positioning.
In fact, we partner with external advisors and have recently hired a chief marketing officer has a strong background in both consumer product.
And <unk> industries.
It could be consistent messaging about our plan.
And positioning with the marketplace.
To provide you some additional color on specific geographies, we have already announced our intention to hire up to 300 customer experience specialists to support our growing business at our Mccarthy.
It can be from the Philippines.
We anticipate the hiring to be complete by the middle of this quarter.
We also went live with the previously announced telecom client in South Africa, where we now run 100% of that customer.
Operations.
Across multiple sites and we are looking to add.
Our new site in Port Elizabeth.
Further support this endeavor.
We continue to see significant growth in our India operations, where we are gaining talent new age digital companies.
These updates are in line with our ongoing business expansion across telecom.
And other emerging consumer segments across major markets.
Across this segment other programs.
The growing teams will focus on delivering end to end.
Digital customer experience solutions for some of the finest brands globally.
The majority of our employees continued to upgrade a significant proportion of our delivery from a work from home environment in compliance that is local regulations.
And movement restrictions.
Many parts of the world.
As we.
And our clients prepare for next year's budget.
He will begin discussing with them.
<unk> road map towards a long term split off at home versus onsite.
We continue to believe that this will end up eventually.
Perhaps a 70 525 split.
Only time will confirm that.
This will help us assess potential optimization of our physical infrastructure.
Before we open up the call to questions.
I wanted to present some of our key growth areas of focus from where I sit in my new role here.
Disciplined.
I am responsible for driving business operations.
<unk> value.
Synergy.
The organization.
Aligning organizational priorities with a long term strategy.
In particular I plan to focus on transforming starting.
A more customer centric organization that leverages emerging technologies to deliver innovative solutions in specific industries like.
With the expanding personnel and leadership teams we are building.
We have quickly strengthening the resources, we have in place to drive growth across our verticals.
In the early days.
We have identified five specific verticals that you plan to focus on within our business development strategy.
So I would like to take some time to briefly summarize the drivers and the.
The opportunities we see in each.
We will primarily be focused on the following industry vertical communication media and telecom.
Second retail and e-commerce.
Hi Tech.
Banking financial services and insurance.
Yeah.
And others, comprising largely education travel and hospitality.
These are sectors that we have deep domain knowledge.
Global capabilities.
A demonstrable track record.
And all sectors.
Likely to experience significant growth in the short to medium term across the geographies that we de lever from.
These sectors also offers significant off shoring and near shoring opportunities, which are margin accretive.
I think moving to the fourth quarter of 2021 and prepare for 2022.
We remain focused on maintaining our momentum within our key geographies and vertical.
As well as ensuring the continued efficiency.
Our global operations.
I am pleased to be joining static at this point in the company's journey and look forward to abundant growth opportunities aimed.
Aim to capture in the near and long term.
Operator, we will now open the call for questions. Thank.
Thank you.
Thank you and at this time is we would like to ask a question. Please press Star then the number one on your telephone keypad.
Anyone need assistance at any time, Please press star zero and an operator will assist you.
No we <unk> our first question comes from them.
Chris Howe from Barrington.
Your line is open.
Everyone.
Nice nice to hear your voice box.
Comments.
On the company moving forward.
Thank you Chris.
Leading off and no specific order here.
I had a question out of curiosity recently domestically we've had some complexity as it relates to a recovery in travel.
Whether that's pilot strikes.
Changes in flight schedules can you talk about the recovery in travel.
Aside from increased passenger traffic volume.
I would imply that this increased volume could also create.
Temporary pockets of increased complexity that maybe benefits.
Your recovery in this end market.
Sure approved do you want to provide context or I'm happy to start and then would request.
And the cash to chime in.
That's a very fair question, Chris I guess, when you talk of recovery in the travel space, whilst we are cautiously optimistic.
We feel some of these.
Is it good or bad that actually could be beneficial for us if you think about COVID-19 and Covid shock.
I was wondering if the volume increase Chris came off the back off.
Cancellations rescheduling.
And as some of these.
Capacity comes online.
We would think until systems until everything stabilizes.
Many of these irregularities.
Actually provide some interesting E.
Spooked and volumes.
And be there might be complexity, resulting in more queries that my need.
Expertise in handling so whilst we haven't it's perhaps a bit too early to forecast. This.
Into the future.
But we do think this could actually provide interesting opportunities fitch, which certain analytical tools that we plan to deploy.
Good actually creates a lot of stickiness as far as customer business and customer response of concern from our perspective.
I'll just take a pause there and see if a group in the gosh, what would you like to add to that.
Sure part of it I think you're bang on and.
As you rightly said.
What we saw was this whole world is getting into awarded Windstorm, and then people just huddled up together to cancel all their travel plans and it was a pause so the world almost came to a standstill, but now things are opening up and as things are opening up very interesting complexities of calls.
Our happening just to give you. An example on an average traveler it used to go to a website for travelport because ticket get it on the App and then do a boarding with a flight, but now they're asking additional questions, especially on the international sector as to what is the protocol that I have to follow is there an RT PCR that we have.
Get it done.
So these are there additional questions that are coming up and in terms of whether there is a need for acquiring tying these this vaccine approved while travel portals and airlines are trying to publish as much as information as possible, but safety becoming of Paramount importance that is an element of anxiety and uncertainty.
Which in a way is raising as you rightly said, Chris additional complexities of calls and they are driving some volume. So on a per capita basis for a given number of like the number of calls has gone up and that's what is being visible based on the kind of data that we have seen.
That's perfect. Thank you for the color and I have one follow up here.
This is in line with some broad comments about the key target growth areas.
By end market, you mentioned communications media telecom retail ecommerce and many others.
Can you comment on what Youre seeing today in terms of the intensity of competition.
For business within these end markets.
And your competitive position as it relates to what you're seeing.
And your sandbox.
Sure. Thanks, Chris.
In terms of the sectors that I touched upon.
Interestingly there are.
Some interesting both supply side and demand side dynamics, so on the demand side.
There is a lot happening as there is more spend going on in these sectors.
Please actively focusing on looking at how do they increase their share of wallet with customers how do they get new customers on board, how do they improve stickiness of offering.
Interestingly quite.
Quite happy.
Outsource what they deem as non core operations, so to that extent that Dennis dove tail wins in this sector because of that.
Got it.
Lifestyle kind of the demand side dynamics now equally what's happening is that there are companies.
Who are the service providers I E our competitors.
Obviously positioning themselves for this increase in demand and no mark So I'm guessing when you look at some of the numbers of some of our competitors.
Now where do we see a differentiation.
I think E V.
We have the ability to support.
Some noise in the background I just can you have.
Have you and Jimmy.
Yes.
Yeah.
So we have from a competitive differentiation perspective, what do we bring to the table.
We have a very strong backend.
Off niche onshore near shore.
And offshore geographical locations.
Which is unmatched.
I'm not sure if you look at much.
Definitely some companies that are domain.
We are probably better placed than most including places like Malaysia like even some of the larger players just about making our foray into that.
Already very well established and that hasn't changed.
Secondly, we have the ability to offer support.
What could be languages globally.
Hi.
In terms of the geographies that you can.
The support from <unk>.
B E.
The languages that we can provide support for them.
And Todd.
Demand is also the fact that we are now partnering in the digital solutions area.
A number of providers.
Digital solutions, which allows us to customize our offerings now.
Now that coupled with the deep domain knowledge of having supported some of these companies and having an understanding of their own internal systems and processes I think that positions us very well.
Just to your question none of these sectors that I talked about.
Areas that we don't have domain expertise our domain capabilities.
So we're not really looking to get into domains that we have got no capabilities at <unk>.
Track record it so what people really look to do it.
To leverage our beef.
Our expertise.
And the multiple delivery platforms and.
Locations.
And last but not least the multiplicity of languages that we offer to be able to provide a unique customer experience as I mentioned in over 30 odd languages.
I hope that gives you some perspective.
Okay.
And Ah proof if.
If you guys have anything else yeah. That's fine you have covered it but you have covered everything.
I have other questions, but I'll hop back in the queue to give others a chance to thank you for the color.
You may now countries. Thanks.
Yeah.
Yeah.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
There are no questions. Okay. We now have our next question from a J.
Cummins from B Riley.
Your line is open.
Hi, This is Katherine can help answer that come in thank you guys for taking my questions. The first question I had is.
And what impact of the cyber security incident have on revenue and gross profit during the quarter and do you guys expect.
Even gross margin will continue to be impacted in the coming quarter.
The cost will you take.
Yeah, I'll take that yeah.
Uh huh.
So yes during the quarter, we did see some pressure.
Due to the cybersecurity incident, and like I called out in my remarks.
On a gross margin basis, we lost about 75 basis points in this quarter.
But the good news for US really is the act.
But it's typically on this incident.
We have completely replaced the event itself right and as it is that both decide Oh I think that customers are very confident with their back end systems. We.
We have had no customer issues because of this event itself and I don't see any ongoing financial impact.
Because of the incident itself.
However, I've mentioned that in the last earnings call as well and.
Some of the discussion.
But I expect that not to this event, we have now identified.
Certain measures that we have to pay to send them.
I can ecosystem in the landscape so I expect that over the next.
Three or four quarters that we may enhance our capex and deploy new types of solutions.
Corporate events in the future, but from a purely from a P&L standpoint are the event is neutralized.
I don't see continued impact of that on our financials.
Yes.
Okay, great. Thank you.
And then another question for me would be can you guys talk a little bit about the performance across key verticals.
Nice to see the growth in telecom, but what's driving the year over year decline in E Commerce and consumer vertical and then also what's driving the decline in the health care vertical.
So, but I do like to take that.
Sure.
So you see E Commerce, I mean, if you looked at.
The health care vertical.
All declined in the healthcare vertical was largely off the back off.
<unk> support program that we had we were already prepared for them.
So if you look at a lot of that happened in this.
This quarter, but in the <unk>.
This quarter, but in this quarter that adds the vaccination support requirements in the U S came to an end.
We had already planned for that kind of a decline and that really explains the decline in the health and the health care segment.
No.
This is this is something that we had already planned for so it's not something and therefore already.
Factored into our budgeting process and we talked about this particular sector. So in the healthcare as I mentioned it was off the back of decline in <unk>.
The vaccination support Kona largely in the U S.
In the E Commerce and <unk>.
Consumer sector. There are certain there was some kind of change in terms of volumes fairly marginal.
Largely impacted if you see on a quarter on quarter basis, largely because of the effect of the and some of that.
Obviously meant that we lost as Josh mentioned.
<unk> got two of our revenues and you know that this business can be fairly.
And therefore that that was really the main driver.
Decline in E Commerce and consumer safety.
So if you look at the numbers if you compare the numbers versus maybe what on a quarter on quarter basis. That's really the reason because if you see on a nine month basis.
Commerce and consumer actually gone up.
Great. Okay. One final question from visit which yeah. That's helpful. Thank you. One final question for me, just which verticals verticals can you believe it will be.
Key growth drivers for the company going forward.
Of the Fox.
<unk>.
After five.
Retail e-commerce.
Clearly.
Communications media and telecom.
Whilst these sectors may not be growing as fast as some of the other sectors for example high tech.
Yeah.
This is the communication media and telecom space is a space that we have very strong credentials.
Now, having said that if you see from a tailwind perspective, if we talk purely off of percentage growth.
If you think of the next 12 to 18 months.
I would think retail and e-commerce.
Based on everything we see.
And that is not just across its across the U S, India and some other geography.
And some of our customers in the high Tech space. These two actually cooling very bad.
And we would think that going forward.
It would probably be engines for growth.
Some of the others like BFS hi.
And of course, the media and telecom sector following fairly close.
Does that help you get some color.
Yes. Thank you so much.
We have our follow up question from Chris Howe from Barrington. Your line is open.
Thanks, one quick follow up here.
Just wanted to ask a question about the SG&A expense line are you.
You mentioned 300 specialists being added in the Philippines, the middle of this quarter.
As we consider that along with your investments overall.
How should we think about the level this past quarter.
And how we.
Perhaps step up from this level into the fourth quarter.
And into the early part of next year.
Yep.
And I can take that question.
Bruce can add statistic.
I mean the.
The people that we added in Mccarthy that really does not impact on SG&A. Because those are people that did have agents that will be used for executing the project. So it's more to see.
The <unk> line, but on SG&A in the immediate quarter Q4, I don't expect that agenda to go up significantly, but the long term vision for others to invest in our sales marketing digital teams and all of that cost will go in SG&A. So I expect there will be a step up in our agenda in the interim period, while these.
<unk> group life and the quantum of that we are still assessing right and we're making plans getting into 2020 budget and we should be able to provide you with more color.
The next.
Three four months when we speak to next.
Yeah.
Yeah.
Yeah.
Excuse me I've got nothing more.
I think Oh gosh, Thank you I've got nothing more to that.
Yeah, Chris does that answer.
Crystal Oh, Queensland was disconnected. Please press star one again Chris.
You were disconnected from the queue alright.
Alright, he snapped back.
Perfect. Thank you.
Okay, Chris you're back on the queue.
Yes, that's all I have.
Perfect Okay.
Thanks Kristen.
Oh, there are no questions at this time and I would like to.
I'll hand, it over back to Mr. Gupta.
Okay. Thank you Joseph and thank you all for joining US this afternoon and for your continued support of static I look forward to speaking with you next when we report our fourth quarter and full year results.
Thank you and have a wonderful day.
Thank you ladies and gentlemen, you may now disconnect.
Great. Thank you so much bye bye.
Excellent.
Okay.
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Good afternoon, good afternoon, everyone and thank you for participating in today's conference call to discuss starts X financial results for the third quarter ended September 30, 2021.
Joining us today, our starplex executive Chairman and global CEO apart Sengupta, the company's CFO, because silica and the company's president Bartow.
Following their remarks, we'll open the call up for your questions before we continue we'd like to remind all the participants that the discussion today may contain certain statements, which are forward looking in nature pursuant to the safe Harbor provision of the federal Securities laws.
These statements are based on the information currently available to us and are subject to various risks and uncertainties.
It could cause actual results to differ materially.
<unk> advises all those listening to this cultural review the latest 10-Q and 10-K posted on its website for a summary of these risks and uncertainties.
So I think the south undertakes no responsibility to update any forward looking statements.
Further the discussion today may include some non G. A a P measures in accordance with regulation G. The company has reconciled as have the bees amounts back to the closest.
V a P based measurement.
The reconciliations can be found in the earnings release on the investors section on the website.
And I would like to remind everyone that the webcast replay for today's call will be available.
Via the investors section of the company's website at Triple W. Dot startup dot com now I would like to try I'll the call over to start the ex executive Chairman and global CEO approach. Some Gupta. Please go ahead.
Thank you very much Joseph good afternoon, everyone and thank you for all joining us today's call.
Our third quarter performance demonstrates the progress we have made with driving growth across our core verticals and continuing to strengthen our operational foundation.
We generated year over year increases across both revenue and adjusted EBITDA and sustained our prudent approach to cost management throughout our organization.
On an operational level, we have continued to make deep platform enhancements support a global workforce and make key additions to our leadership team.
These efforts have helped us further optimize our platform and maximize our organizational efficiency.
Examining our performance by vertical our growth during the third quarter was primarily driven by our sustained momentum with clients across the telecom and banking and financial services.
And technology and IP services verticals.
Tend to be the trends, we noted last quarter. These verticals have continued to make a healthy recovery from last year's spend and bank related loss.
Well, the travel and hospitality vertical was down year over year on a revenue basis.
We did see sequential volume improvement relative to last quarter has more geographies start easing restrictions and have begun gradually reopening.
By geography, we generated meaningful year over year improvements in India, the middle East and South Africa as a result of both our strengthened operations in those regions and our sound recovery from particularly steep pandemic related impacts last year Mike.
By contrast, we experienced some year over year revenue softness in the United States due to disruption caused by the cybersecurity incident and growing constraints around labor availability and wage pressure.
As we continue to monitor these trends we are placing a strong priority on ensuring we have a robust set of resources for delivering our high quality business process management solution.
This includes ensuring we have the team members needed to support onshore solutions for certain verticals and continuing to make investments in new digital capabilities for our platform.
Our newly appointed President part of throat, maybe later on our call to discuss the strategy and specific developments in greater depth, but I'm pleased with.
With the strong progress we have made to date and look forward to further developing and operational Dexter, let's see we have consistently demonstrated during a dynamic time for the global computer industry B.
Before I turn the call over to our CFO gosh, so like her to walk you through our third quarter financial performances in greater detail I wanted to provide a brief update on our recovery from the cyber security attack, we experienced at the end of Q2.
As a reminder, the threat involved encryption off some of our systems and was contained to just a few specific geographies, mostly impacting agents who are working from home.
Swiftly eradicated the threat and restored the affected agents and clients safe secure access to our platform and I've seen further bolstered our platform security and protection measures to safeguard against similar threat.
Some of the measures we have undertaken to enhance our managed endpoint detection and response include having a two factor authentication protocol Geo fencing and predictive analytics tool in there.
In addition, we have also created a 24 seven and cyber security monitoring and command Center.
While the incident did somewhat impact our financial performance during the quarter as the gosh will detail. Shortly the fact that we nevertheless drove year over year top line growth and adjusted EBITDA profitability expansion indicates that our team's tireless commitment and flexibility has helped us create a resilient operational.
And financial Foundation.
This infrastructure has helped us navigate some of the most difficult times, our business and our industry has ever experienced and we plan to continue leveraging our solid platform to deliver secure.
<unk>, an exceptional customer experience management solutions across our global client base.
I'd now like to turn the call over to the gosh, the more detailed overview of our Q3 financial performance the Gush.
Yeah. Thanks approved.
So starting on the top line net revenue in Q3 increased 6% to $172 8 million compared to $162 7 million in the year ago quarter.
On a constant currency basis net revenue increased by 7%.
The year ago quarter.
This year over year growth reflects continued strength across key verticals and geographies.
On a nine month basis.
The new increased 13% as compared to they get a repeat it.
This is a testimony of the resilience and innovation shown by our team to quickly adapt our hybrid model of working and keep the brewpub business.
This also gives us confidence that we have the capabilities to handle any disruption that may be caused by COVID-19 and we can now strongly focused on driving growth.
Gross profit for quarter, three was $21 5 million compared to $22 3 million in the year ago quarter.
Gross margin was 12, 5% compared to 13, 7% and they get a robot.
This decline is primarily attributable to the cybersecurity incident, where it would be lost 75 basis points.
In addition, gross margin was impacted by the year over year growth.
I'm, the telecom financial and business services and public sector verticals.
Largely delivered onshore.
We are also closely monitoring the growing wage pressure and labor shortages.
Clearly in the U S and.
And we will take appropriate measures, including optimizing our infrastructure costs to offset any impact from dis.
While not all markets.
Selling general and administrative costs.
And they for sure.
<unk> expenses for Q3 decreased to $14 1 million compared to $14 2 million and they get a good quarter.
As a percentage of revenue SG&A improved 120 basis points to seven 6% compared to eight 8% and they get a good quarter.
This is a result of continued operating leverage in the back of the higher revenue generated during the quarter.
We expect to make investments in high performing sales the loosening marketing and digital teams or the next few quarters in order to drive growth and differentiation.
This could result in higher SG&A costs.
Everyday performance.
Having said this we continue to remain guided by our stated objective of achieving sustainable double digit adjusted EBITDA might be.
Net income attributable to stopping shareholders for Q3 was.
0.1 million or zero cents per share.
Compared to a net income attributable to stock the shareholders, all 0.4 million or one one cents per share in the year ago quarter.
Adjusted net income attributable to stock the shareholders for Q3 was $2 9 million or seven cents per share.
Adjusted net income attributable to stock the shareholders.
$3 3 million or eight cents per share they get a good quarter.
Adjusted EBITDA in Q3 increased slightly to $15 9 million compared to $15 6 million the year ago quarter.
As a percentage of revenue adjusted EBITDA was nine 2% compared to nine 6% and they get a little closer.
During the quarter, we received $2 7 million in government grants compared to $1 1 billion and they get to Colorado.
This helped offset the loss of Martin and caused by the cyber security incident.
Led by revenue growth adjusted EBITDA for the nine months increased by 53% as compared to the year ago period.
As a percentage of revenue.
EBITDA for the nine month period was 10, 4% compared to six 2% they get to pick it.
From a balance sheet perspective, our September could be 2021.
Cash and restricted cash totaled $63 5 million compared to the $4 1 million at June 32021.
With the increase due to improved working capital during this quarter.
Total debt at September 32021 improved to one seven people and $4 million compared to $173 9 million at June 32021.
Net debt at September 32021, and fruitful, one or $6 9 million compared to $119 8 million at June 30, 2021.
Our net leverage on a trailing 12 month basis continues to stay well under two X.
And we remain comfortable with our liquidity position as it stands today.
In addition, we purchased an aggregate of 57759 shares of our common stock under our repurchase plan during the third quarter.
We did this at an average cost of <unk>.
$5 and 67 plus years.
This was a testament to our continued confidence in our long term growth prospects as well as our strong execution on these initiatives.
As he focus into the fourth quarter and prepare for 2022, we have maintained our commitment to invest in improving that IP and go to market strategy, including enhancing our sales capabilities and continuing to grow our sales and marketing teams.
We expect these investments combined with the strength Stendal take you have to make sure you put in place to bolster our operational foundation for the quarters ahead, and we look forward to providing further updates on our growth trajectory.
This concludes my prepared remarks, I will now turn the call over to a company no precedent, but it though.
Very pleased to formally introduce to all of you today.
What do you.
Sure. Thank you for gosh.
It is a pleasure to be joining you on today's call.
Well today marks my first earnings call with this topic team as president.
<unk> been in the company's board since 2018.
And being a managing partner at capital square bought the companies.
Companies controlling shareholders.
Through this position and my past roles as trading ships in Asia, Ing's Bank Pwc and Citibank.
I have gained extensive experience in driving growth and innovation.
I greatly look forward to leverage this experience to advance <unk> strategic initiatives, which I will detail shortly.
I was joined in October by another new appoint digital starter ex executive team.
The company's new global Chief revenue Officer.
Shamrock.
Does he will lead the global go to market organization, including key client relationships business growth and industry specific digital initiatives.
And he brings over 25 years of experience with managing large enterprise clients across technology and business process services.
He will play a critical role.
And driving starting a new phase of growth.
Building momentum with our focused industry and go to market approach.
Strengthening our sales and solution capability.
And sharpening.
Our market positioning.
The Knicks insights will be invaluable as we drive business growth across new industry segments.
Markets and service lines.
And I look forward to working with him to accelerate our capabilities across the customer experience transformation journey that'd be helpful.
Our appointments come as part of a broader buildout of the executive team.
And we will be surrounded by several other key new appointments that are meant to strengthen our leadership in core areas of growth.
For instance.
We have recently on boarded a new Chief Digital Officer Avi Jane.
Who will be responsible for overseeing the design launch and promotion of our new customer facing digital solutions.
But I expect it to make our platform. So the street more tech enabled and comprehensive.
We will provide further updates as the Appointment's Amit.
I am proud of the progress we've made so far and honor to experience a tremendous strength and capability of our management team firsthand.
As we build out our leadership team. We are also increasing our key personnel to support regions and verticals.
Expressing.
The strong growth trends.
As Victor mentioned earlier much of us being build out across our organization.
Will it be concentrated within the sales and marketing.
As we further develop our lead generation did.
Digital solution and capabilities and brand positioning.
Yeah.
In fact, we partner with external advisors and have recently hired a chief marketing officer has a strong background in both consumer products and <unk> industries.
It can be consistent messaging about our brand and positioning to the marketplace.
To provide you some additional color on specific geographies, we have already announced our intention to hire up to 300 customer experience specialists to support our growing business that's M Mccarthy.
<unk> campus in the Philippines.
We anticipate the hiring to be complete by the middle of this quarter.
We also went live with the previously announced telecom client in South Africa, where we now run 100% of that customer.
Support operations.
Across multiple sites and we are looking to add.
Our new site in Port Elizabeth.
Further support this endeavor.
We continue to see significant growth in our India operations, where we are gaining ground new age digital companies.
These updates are in line with our ongoing business expansion across telecom.
And other emerging consumer segments across major markets.
Across this segment other programs the growing teams will focus on delivering end to end.
Digital customer experience solutions for some of the finest brands globally.
The majority of our employees continue to operate a significant proportion of our delivery from a work from home environment in compliance that is local regulations.
And movement restrictions across many parts of the world.
As we.
And our clients prepare for next year's budget.
We'll begin discussing with them the steady state road map towards a long term split off at home versus onsite.
We continue to believe that this will end up eventually.
A 70 525 split.
Only time will confirm that.
This will help us assess potential optimization of our physical infrastructure.
Before we open up the call to question.
I wanted to present some of our key growth areas of focus from that I sit in my new role.
It didn't.
I am responsible for driving business operations.
Client value and synergy across the organization.
And aligning organizational priorities.
Long term strategy.
In particular I plan to focus on transforming starting.
Into a more customer centric organization that leverage emerging technologies to deliver innovative solutions in specific industries.
With the expanding personnel and leadership teams that we are building.
We have quickly strengthening the resources, we have in place to drive growth across our verticals.
In the early days.
We have identified five specific verticals that you plan to focus on within our business development strategy.
So I would like to take some time to briefly summarize the drivers and the opportunities we see in each.
We will primarily be focused on the following industry vertical communication media and telecom.
Second retail and e-commerce.
Hi Tech.
Banking financial services, and insurance and health care.
And others, comprising largely education travel and hospitality.
These are sectors that we have deep domain knowledge.
Global capabilities.
The Minister will track record.
And Ah sectors that are likely to.
<unk> significant growth in the short to medium term across the geographies that we de lever from.
These sectors also offers significant offshoring.
Nearshoring opportunities, which are <unk>.
<unk> accretive.
I think moving to the fourth quarter of 2021 and prepare for 2022.
We remain focused on maintaining our momentum within our key geographies and vertical.
As well as ensuring the continued efficiency.
Our global operations.
I am pleased to be joining started at this point in the company's journey and look forward to abundant growth opportunities he aimed.
Aim to capture in the near and long term.
Operator, we will now open the call for questions.
Thank you.
Thank you and at this time, if he would like to ask a question. Please press Star then the number one on your telephone keypad.
Should anyone need assistance at any time, Please press star zero and an operator will assist you.
No we <unk> our first question comes from.
Chris Howe from Barrington Your line is open.
Everyone.
Nice nice to hear your voice <unk>.
Comments.
On the company moving forward.
Thank you Chris.
Leading off and no specific order here.
I had a question out of curiosity recently domestically we've had some complexity as it relates to a recovery in travel.
Whether that's pilot strikes.
Changes in flight schedules can you talk about the recovery in travel.
Aside from increased passenger traffic volume.
I would imply that this increased volume could also create.
Temporary pockets of increased complexity that benefits.
Your recovery in this end market.
Sure approved do you want to provide a context or I'm happy to start and then would request.
And the cash to chime in.
But that's a very fair question, Chris I guess, when you talk cost recovery in the travel space, whilst we are cautiously optimistic.
We feel.
Some of these.
Is it good or bad that actually could be beneficial for us if you think about COVID-19 and Covid shock.
I was wondering if the volume increase Chris came off the back off.
Cancellations rescheduling.
And as some of these some capacity comes online.
We would think undo.
Systems until everything stabilizes.
Many of these irregularities could actually provide some interesting E.
Spurts and volumes.
And b, they might be complexity, resulting in more cities that might need.
Expertise in handling so whilst we haven't it's perhaps a bit too early to forecast. This.
Into the future.
But we do think this could actually provide some interesting opportunities fitch, which certain analytically.
Analytical tools that we plan to deploy.
Could actually create a lot of stickiness as far as customer business and customer responsive concern from our perspective.
I'll just take a pause there and see if a group in the gosh, what would you like to add to that.
Sure part of it I think you're bang on and.
You rightly said the.
What we saw was this whole world is getting into a world windstorm and then people just huddled up together to cancel all of their travel plans.
And it was a pause so the world almost came to a standstill.
But now things are opening up and as things are opening up all the interesting complexities of calls are happening just to give you. An example on an average traveller used to go to our website for our travel portal because ticket.
Get it on the App and then do a boarding with a flight, but now they're asking additional questions, especially on the international sector as to what is the protocol that I have to follow is there an RT PCR that we have to get it done.
So these are the additional questions that are coming up and in terms of whether there is a need for a quote and tying these this vaccine approved while travel portals and airlines are trying to publish as much as information as possible, but safety becoming of Paramount importance that is an element of anxiety and uncertainty.
Which in a way is raising as you rightly said, Chris are additional complexities of calls and they are driving some volume. So on a per capita basis for a given number of like the number of calls has gone up and that's what is being visible based on the kind of data that we have seen.
That's perfect. Thank you for the color and I have one follow up here.
This is in line with some broad comments about the key target growth areas.
By end market, you mentioned communications media telecom retail ecommerce and many others.
Can you comment on what you're seeing today in terms of the intensity of competition.
For business within these end markets.
And your competitive position as it relates to what you're seeing.
And your sandbox.
Yeah.
Sure. Thanks, Chris.
In terms of the sectors that I touched upon.
Interestingly there are some interesting both supply side and demand side dynamics.
So on the demand side.
There is a lot happening as there is more spend going on in these sectors.
Companies are actively focusing on looking at how do they increase their share of wallet with customers how do they get new customers on board, how do they improve stickiness of offering.
And interestingly.
Quite happy.
To outsource what they deem as non core operations, so to that extent that Dennis dove tail wins in this sector because of Covid.
<unk> side kind of the demand side dynamics now equally what's happening is that there are companies.
Who are the service providers I E our competitors.
Obviously positioning themselves for this increase in demand and no mark So I'm guessing when you look at some of the numbers of some of our competitors.
Now what do we see a differentiation.
I think E V.
We have the ability to support.
Some noise in the background.
Have you and Jimmy.
Yes.
Yeah Yeah.
So we have from a competitive differentiation perspective, what do we bring to the table.
We have a very strong backend.
Nish onshore near shore.
And offshore geographical locations.
Which is perhaps an unmatched if you look at much.
Maybe some companies that are domain.
We are probably better placed than most including places like Malaysia like even some of the larger players just about making a foray into that deal.
Already very well established and well entrenched.
Secondly, we have the ability to offer support.
Oh, what took the languages globally.
Hi, Sue.
In terms of the geographies that you can.
Office support from <unk>.
B the languages that we can provide support from.
And the third element is also the fact that we are now partnering in the digital solutions area.
The number of providers.
Digital solutions, which allows us to customize our offerings.
That coupled with the deep domain knowledge of having supported some of these companies and having an understanding of their own internal systems and processes.
I think that positions us very well.
Just to your question none of these sectors that I talked about.
Areas that we don't have domain expertise our domain capabilities.
So we're not really looking to get into domains that we have got new capabilities.
Track record in so what people really look to do is to leverage this expertise.
And the multiple delivery platforms and locations.
And last but not least the multiplicity of languages that we offer to be able to provide a unique customer experience.
As I mentioned in over 30 odd languages.
I hope that gives you some perspective.
And gosh.
And approved.
If you guys have anything else yeah, that's fine you have already.
Covered everything.
Okay I have other questions, but I'll hop back in the queue to give others a chance. Thank you for the color.
You're very welcome Chris Thanks.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
There are no questions. Okay. We now have our next question from Zach Cummins from B. Riley. Your line is open hi. This is Katherine can help answer that come in.
Thank you guys for taking my questions. The first question I have is what impacted the cyber security incident have on revenue and gross profit during the quarter and do you guys expect revenue and gross margin.
Continue to be impacted in the coming quarter.
The cash will you take.
Yeah, I'll take that yeah.
Yeah.
So yes during the quarter, we did face some pressure.
Due to the cyber security incident.
And like any called out in my remarks on a gross margin basis, we lost about 75 basis points in this quarter.
But the good news for US really is reacted but it's strictly on this incident and we are completely replaced the event itself right and as a result of this.
I think our customers are very confident with our back end systems.
No customer issues because of this event itself.
I don't see any ongoing financial impact.
Cause of the incident itself.
I believe we're I've mentioned that in the last earnings call as well.
Some of the discussion.
But I expect that node to this event, we have now identified.
Certain measures that you have to pay to send them up.
Ooh ecosystem in the landscape, so I expect that over the next.
Three four quarters that we may enhance our capex and deploy new types of solutions.
Of course, the key events in the future, but from a purely from a P&L standpoint.
Is neutralized.
And I don't see continued impact of that on our financials.
Yes.
Okay, great. Thank you and then another question for me would be can you guys.
Talk a little bit about the performance across key verticals are nice to see the growth in telecom, but what's driving the year over year decline in E Commerce and consumer vertical and then also what's driving the decline in the health care vertical.
So, but I do like to take that.
Sure.
So you see E Commerce I mean, if you look at.
The health care vertical.
All declined in the healthcare vertical was largely off the back off.
Vaccination support program that we had we were already prepared for it so.
So if you look at a lot of that happened in this.
This quarter, but in the previous quarter, but in this quarter that adds the vaccination support requirements in the U S came to an end.
We had already planned for that kind of a decline and that really explains the decline in the health and the health care segment.
No.
This is this is something that we had already planned for it so it's not something and therefore already.
Factored into our budgeting process and we talked about this particular sector. So in the healthcare as I mentioned it was off the back of decline in <unk>.
The vaccination support Corona largely in the U S.
In the E Commerce and <unk>.
Consumer sector. There are certain there was some kind of change in terms of volumes fairly marginal.
Largely impacted if you see on a quarter on quarter basis, largely because of the effect of the ransomware, which obviously meant that we lost.
Josh mentioned B.
<unk> got two of our revenues and you know that this business can be fairly soon.
And therefore that that was really the main driver.
Decline in E Commerce and consumer safety.
So if you look at the numbers if you compare the numbers versus maybe what on a quarter on quarter basis. That's really the reason because if you see on a nine month basis.
Commerce and consumer has actually gone up.
Great. Okay. One final question for me, which.
Which you got it that's helpful. Thank you.
One final question from me, just which vertical verticals do you believe will be a key growth driver for the company going forward.
Of the five.
After five.
Retail e-commerce.
Clearly.
Communications media and telecom.
Why is that these sectors may not be growing as fast.
As some of the other sectors for example high Tech.
This is the communication media and telecom space is a space that we have very strong credentials.
Now, having said that if you see from a tailwind perspective, if we talk purely off of percentage growth.
If you think of the next 12 to 18 months.
I would think retail and e-commerce based.
Based on everything we see.
And that as Mark just to cross across the U S, India and some of our other geographies.
And some of our customers in the high Tech space do you still actually growing very bad.
And we would think that going forward.
It would probably be engines for growth.
Some of the others like BFS hi.
And of course, the media and telecom sector following fairly close.
Does that help you get some color.
Yes. Thank you so much.
We have our follow up question from Chris Howe from Barrington.
Your line is open.
Thanks, one quick follow up here.
Just wanted to ask a question about the SG&A expense line are you.
You mentioned 300 specialists being added in the Philippines.
All of this quarter.
As we consider that along with your investments overall.
How should we think about the level this past quarter.
And how we.
Perhaps step up from this level into the fourth quarter.
And into the early part of next year.
Yeah. So this is the key.
Gosh.
Yeah. Good question.
And Bruce can add so.
So Chris I mean, the key.
The people that we added in the coffee that really does not impact of SG&A. Because those are people that did have agents that will be used for executing the projects. So it's more to the.
<unk> late but on SG&A in the immediate quarter Q4, I don't expect that they seem to go up significantly, but the long term vision for others to invest in our sales marketing digital teams and all of that cost will go in SG&A. So I expect there will be a step up in our agenda in the interim period, while these.
<unk> growth rate and the quantum of that we are still assessing right and we're making plans getting into 'twenty go into the budget and we should be able to provide you with more color.
The next.
Three four months when we speak to you next.
Yeah.
Yeah.
Yeah.
Oh excuse me.
Nothing more.
I think guys. Thank you.
Most of that.
Yeah, Chris does that answer.
Crystal I am concerned I was disconnected. Please press star one again Chris.
You were disconnected from the queue alright.
Alright that he's now back.
Perfect. Thank you.
Hey, Chris you're back on the queue.
That's all I have.
Perfect Okay.
Thanks Kristen.
Oh, there are no questions at this time and that wasn't like too.
Hand, it over back to Mr. Gupta.
Okay. Thank you Joseph and thank you all for joining US this afternoon and for your continued support of static I look forward to speaking with you next when we report our fourth quarter and full year results.
Thank you and have a wonderful day.
Thank you ladies and gentlemen, you may now disconnect.