StarTek Inc. Reports Third Quarter Earnings and Raises Dividend; Board Authorizes Stock Repurchase Program Up to $25 Million

Business Wire, Nov 4, 2004

DENVER -- StarTek Inc. (NYSE: SRT) reported that fully diluted earnings per share from continuing operations decreased 21 percent for the quarter ended September 30, 2004, to $0.34 compared to $0.43 for the third quarter of 2003. Fully diluted earnings per share including discontinued operations decreased by 45 percent to $0.22, compared to $0.40 for the same period in the prior year. For the nine months ended September 30, 2004, fully diluted earnings per share from continuing operations increased 24 percent to $1.29 from $1.04 for third quarter of 2003. Fully diluted earnings per share including discontinued operations increased 14 percent to $1.12 compared to $0.98 for the same period in the prior year. Discontinued operations consist of operations in the United Kingdom, which as previously reported were sold on September 30, 2004.

For the quarter ended September 30, 2004, revenue increased 13.9 percent while gross profit decreased 8.0 percent over the third quarter of 2003. The revenue increase was primarily driven by the continued strong growth in business process management services. The 5.1 percentage point decrease in gross margin, from 26.5 percent to 21.4 percent, was primarily due to:

--the previously disclosed incentive tiered price reduction with our largest client that generated increased volume at lower prices;

--investments in launching an additional facility; and

--re-deploying resources that required a one-time re-training expense to service incremental growth.

Selling, general and administrative expenses decreased by 0.1 percentage point as a percent of total revenue. The dollar increase in selling, general and administrative expenses was primarily attributed to the addition of three new sites over the prior year and costs associated with Sarbanes-Oxley compliance efforts.

For the nine months ended September 30, 2004, gross profit increased 23.5 percent on a revenue increase of 20.3 percent over the same period last year. The revenue increase was primarily due to the continued strong demand for our operational excellence model and the consistent delivery of service performance.

In addition, the Board of Directors declared an increase in the Company's quarterly cash dividend to $0.41 per share, payable November 24, 2004, to StarTek shareholders of record as of November 11, 2004. The dividend per share for the 3rd quarter of 2004 was $0.40, which was increased from the 2nd quarter 2004 dividend of $0.39.

"While we are disappointed with the Company's results for this quarter when compared with last year, we are confident the decisions and investments we have made in the quarter will support continued profitable growth," said William E Meade Jr., President and Chief Executive Officer of StarTek.

StarTek also announced that the Company's Board of Directors has authorized the Company to repurchase up to $25 million of StarTek's common stock. The repurchase program is effective immediately and will remain in effect until terminated by the Board of Directors. The repurchase program will allow the company to repurchase its shares from time to time in accordance with the requirements of the Securities and Exchange Commission on the open market, in block trades and in privately negotiated transactions, depending on market conditions and other factors. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

"We're undertaking this stock buy-back program with high confidence in our current operational performance," Meade said. "Our fundamentals are strong, and our capital position affords us the opportunity to repurchase stock at an attractive market price. We see this as an excellent investment opportunity that's in the best interests of our shareholders."

Company Profile

StarTek Inc. is a leading provider of business process outsourced services, which consist of business process management and supply chain management services. StarTek provides services from eighteen operating facilities, including five in Colorado, five in Canada, two in Virginia and one each in Illinois, Louisiana, Oklahoma, Tennessee, Texas and Wyoming. The Company's primary clients are in the telecommunications and computer software industries, and it also serves clients in the computer hardware, consumer products, cable TV, entertainment, utility, Internet and e-commerce industries. Please visit the Company's website at www.startek.com.

Conference Call

President and Chief Executive Officer Bill Meade will host a conference call to discuss the Company's financial results beginning at 6:30 a.m. Mountain Time (8:30 a.m. Eastern Time) on November 4, 2004. The call can be accessed as follows:

USA: 800-322-2803
    International: 617-614-4925
    Passcode: 16346854
    Conference Host: Bill Meade

A dial-in replay will be available November 4 at 8:30 a.m. Mountain Time through November 12 and can be accessed as follows:

USA: 888-286-8010
    International: 617-801-6888
    Passcode: 83266947

A Web-based replay will be available on November 6 and accessible from the Investor Relations section of the company's website at www.startek.com.