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STARTEK: Margins Improving, Looking for Growth in Healthcare Sector

STARTEK has announced results for Q4 2014 and full year 2014.
Q4 2014

  • Revenues were $64.2m, up 1.2% y/y
  • LBIT was $1.5m, a negative margin of 2.4%, down 98 bps y/y.

Full year 2014:

  • Revenues were $250.1m, up 8.1%
  • LBIT was $4.9m, a negative margin of 2%, up 72 bps.

Q4 revenue contribution from largest clients was:

  • T-Mobile: 30.6%
  • AT&T: 19.6%
  • Comcast 15.7%.

During 2014, STARTEK:

  • Added 17 new clients and $48.6m of annual contract value
  • Signed two new clients with annual contract value of $5.5m
  • Invested $17.4m in opening four new contact centers: two in the U.S., one in Honduras and one in the Philippines, with a total of 2.9k seats. It also closed two under-performing sites, in Jonesboro, AK and Heredia, Costa Rica. In total, it added 2k seats on a net basis in 2014
  • Incurred revenue headwinds in relation to the closure of its Costa Rica contact center, had delayed ramps due to its IP platform migration, and saw softer than anticipated volume from a few large clients.

It plans in 2015 to invest ~$20m in adding ~2.5k seats for future growth.

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Revenue growth has slowed right down (2013 saw 15% y/y revenue growth in Q4 and the full year 16.7%). But at least margins are improving. Closing the sites in Jonesboro and Heredia should lead to further margin improvement in 2015.
Nearly 66% of its Q4 revenues came from just three clients, all in the telecoms, cable, and satellite industry. STARTEK is focused on sector diversification:

  • The immediate priority is the healthcare sector, following its 2013 acquisition of Registered Nurses on Call (RNOC) and its launch of its healthcare division. In 2014, it invested $400k in building out its STARTEK Health offering.  Healthcare is a growing market and an attractive sector to CMS vendors
  • STARTEK is also for momentum in 2015 to come from its receivables management and back office services businesses.

 

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