StarTek, Inc. Net Debt / EBITDA surged on 16.1x from 2.3x to 18.4x in 2018 while EBITDA dropped on 28.7%
03/13/2019 • About StarTek, Inc. (
$SRT) • By InTwits
StarTek, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- StarTek, Inc. is a fast growth stock: FY2018 revenue growth was 66.4%, 5 year revenue CAGR was 16.1% at FY2018 ROIC -6.3%
- EBITDA Margin is quite volatile: 1.5% in FY2018, 3.5% in FY2017, 4.9% in FY2016, -0.3% in FY2015, 2.2% in FY2014
- StarTek, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.6%. At the same time it's in pair with industry average of 7.4%
- CAPEX is quite volatile: $10m in FY2018, $7m in FY2017, $4m in FY2016, $8m in FY2015, $12m in FY2014
- The company has unprofitable business model: ROIC is -6.3%
- It operates with high leverage: Net Debt/EBITDA is 18.4x while industry average is 2.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 66.4%. Revenue growth showed acceleration in FY18Q4 - it increased 121.5% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.4 pp from 1.1% to 2.5% in 2018.
Gross Margin increased on 3.4 pp from 11.1% to 14.4% in FY2018. SG&A as a % of Revenue increased on 2.9 pp from 11.1% to 14.1% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue bottomed in FY2016 at 10.8% and was growing since that time.
Net Income margin decreased on 6.6 pp from -0.44% to -7.1% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 2.0%. The company showed small CAPEX/Revenue decline of 0.76 pp from 2.7% in FY2015 to 2.0% in FY2018. It's average level of CAPEX/Revenue for the last three years was 1.9%. The company has spent a lot to CAPEX (131% of EBITDA) to secure its growth.
Return on investment
The company operates at negative ROIC (-6.3%) and ROE (-24.7%). ROIC decreased on 5.3 pp from -0.98% to -6.3% in FY2018. ROE dropped on 21.9 pp from -2.8% to -24.7% in FY2018.
Management team
Lance E Rosenzweig is a StarTek, Inc.'s CEO. Lance E Rosenzweig is a founder and has spent 1 year with the company. StarTek, Inc.'s CFO Ramesh Kamath has spent 1 year with the company.
Financial and operational results
FY ended 11/30/-0001
StarTek, Inc. ($SRT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 250.1 | 282.1 | 307.2 | 292.6 | 486.9 | 66.4% |
| Gross Profit | 30.5 | 24.3 | 36.4 | 32.4 | 70.2 | 116.9% |
| SG&A | 31.4 | 34.4 | 33.2 | 32.6 | 68.6 | 110.5% |
| EBITDA | 5.5 | -0.8 | 15.1 | 10.3 | 7.4 | -28.7% |
| Net Income | -5.5 | -15.6 | 0.4 | -1.3 | -34.3 | |
Balance Sheet
|
|---|
| Cash | 5.3 | 2.6 | 1.0 | 1.5 | 16.6 | 1,041.3% |
| Short Term Debt | 4.6 | 35.7 | 28.8 | 2.7 | | |
| Long Term Debt | 0.0 | 8.2 | 5.5 | 22.2 | 152.1 | 585.0% |
Cash flow
|
|---|
| Capex | 11.7 | 7.7 | 3.8 | 7.2 | 9.6 | 34.1% |
Ratios
|
|---|
| Revenue growth | 8.1% | 12.8% | 8.9% | -4.8% | 66.4% | |
| EBITDA growth | -30.8% | -113.7% | -2,109.4% | -31.6% | -28.7% | |
|
|---|
| Gross Margin | 12.2% | 8.6% | 11.9% | 11.1% | 14.4% | 3.4% |
| EBITDA Margin | 2.2% | -0.3% | 4.9% | 3.5% | 1.5% | -2.0% |
| SG&A, % of revenue | 12.6% | 12.2% | 10.8% | 11.1% | 14.1% | 2.9% |
| Net Income Margin | -2.2% | -5.5% | 0.1% | -0.4% | -7.1% | -6.6% |
| CAPEX, % of revenue | 4.7% | 2.7% | 1.2% | 2.5% | 2.0% | -0.5% |
|
|---|
| ROIC | -8.1% | -19.2% | 3.5% | -1.0% | -6.3% | -5.3% |
| ROE | -9.7% | -32.3% | 0.9% | -2.8% | -24.7% | -21.9% |
| Net Debt/EBITDA | -0.1x | | 2.2x | 2.3x | 18.4x | 16.1x |
StarTek, Inc. ($SRT) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 115 | 60 | 152 | 159 | | 48.2% | -19.3% | 118.4% | 121.5% |
| EBITDA | 7 | -1 | 4 | 6 | | 28.0% | -131.6% | 99.4% | 3,558.8% |
| Net Income | -6 | -4 | -11 | -10 | | -443.1% | -768.8% | | |
Balance Sheet
|
|---|
| Cash | 1 | 1 | 14 | 17 | | -12.3% | -29.3% | 957.9% | 1,041.3% |
| Long Term Debt | 27 | 30 | 150 | 152 | | 6.2% | 27.5% | 612.6% | 585.0% |
Ratios
|
|---|
| Gross Margin | 18.4% | 8.8% | 15.0% | 15.8% | | 5.5% | -3.4% | 4.5% | 7.4% |
| EBITDA Margin | 5.7% | -1.7% | 2.5% | 4.1% | | -0.9% | -6.0% | -0.2% | 3.8% |
| Net Income Margin | -5.3% | -6.2% | -7.2% | -6.1% | | -7.7% | -7.0% | -5.5% | -2.7% |
Peers in Data Processing & Outsourced S
Below you can find StarTek, Inc. benchmarking vs. other companies in Data Processing & Outsourced S industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| 3PEA International, Inc. ($TPNL) | | -21.2% | 28.5% | 46.2% | 53.8% |
| |
|---|
| Median (55 companies) | | 7.0% | 7.6% | 11.8% | 7.4% |
|---|
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 39.3% | 39.6% | 39.5% | 39.5% | 41.0% |
|---|
| StarTek, Inc. ($SRT) | 12.2% | 8.6% | 11.9% | 11.1% | 14.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.2% | 21.3% | 21.1% | 19.4% |
|---|
| StarTek, Inc. ($SRT) | 2.2% | -0.3% | 4.9% | 3.5% | 1.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| StarTek, Inc. ($SRT) | 4.7% | 2.7% | 1.2% | 2.5% | 2.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 14.1% | 13.1% | 11.7% | 10.7% | 12.1% |
|---|
| StarTek, Inc. ($SRT) | -8.1% | -19.2% | 3.5% | -1.0% | -6.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| Moneygram International, Inc. ($MGI) | 5.5x | 9.5x | 4.5x | 8.0x | 8.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.6x | 1.3x | 2.3x | 2.0x |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
