Startek: Follow-Up Note To CEO Change After Call With Management – StarTek, Inc. (NYSE:SRT)

Follow-up after the recent CEO change announcement

Although I believe the investment thesis as laid out in my most recent article remains intact, I thought it would be prudent to address the unexpected change at the CEO level. As such, here I share my notes from a joint call with Mr. Aparup Sengupta (new CEO), Mr. Lance Rosenzweig (outgoing CEO), and Mr. Ramesh Kamath (NASDAQ:CFO), held a few hours after the announcement was made.


Mr. Sengupta expressed extreme gratitude regarding the job that Mr. Lance Rosenzweig had done navigating the company through a successful integration process while implementing the synergy savings envisioned at the start of this merger. He explained that, from the very beginning, it was decided that once Mr. Rosenzweig successfully executed the integration strategy, =Mr. Sengupta would step in “to put this company into acceleration mode off of what Lance had created.”

Let’s review Mr. Sengupta’s accomplishments that deem him uniquely equipped to take Startek (SRT) to the next level:

  • Aparup was the Global CEO for the original Aegis and grew that organization from $60 million to $850 million in revenue over a seven-year period through both organic growth and acquisitions culminating in a successful sale of that company.
  • Aparup successfully completed 18 acquisitions of both public and private companies, among them Lance’s company (PeopleSupport, Inc.), when their friendship began.
  • He then became executive chairman of The Minacs Group, another global BPO company that was successfully sold to SYNNEX Corporation, a Fortune 500 company.
  • In 2017, as Operating Partner of Capital Square Partners, Aparup repurchases Aegis and joins as its Chairman of the Board. During 2018, Startek appears on his radar culminating in their merger.

Mr. Sengupta assured that a very smooth, amicable transition is happening at a good time of the year and at the right junction of the company: “Everything is in good shape and can only get better,” he reiterated. In terms of strategy, he explained that there were no major disagreements at the board level and that all items they have needed to execute on are in motion. He offered what I found to be a very interesting analogy:

We are approaching this change as a relay race where you are passing on the baton without a change in the track; instead of a prolonged process with multiple bosses. There is really nothing more to this transition.

Both Lance and Ramesh agreed with Mr. Sengupta’s comments. Lance went on to add that the company is in great shape and that he was very happy with the financial performance, the operating performance, and the client growth, pointing to their comments on the press release regarding expected fourth-quarter performance.

Although management did not mention anything related to any other further changes in their leadership positions, I would not be surprised if Mr. Sengupta were to make changes in some of the roles that would better fit with their next acceleration and growth stage, as opposed to roles focusing on integration and synergy implementation.

In conclusion, my perception from the call is that the company is at an inflection point in terms of improved performance. Aparup – as a very seasoned Global BPO CEO and Operating Partner of the 55% owner of the enterprise – feels it is the right time to step in and take Startek to the next level focusing on growth and continued margin expansion. He is taking the baton from Lance, whose integration portion of the relay race has been successfully completed. It was clear to me that the transition has been amicable; why else would the outgoing CEO participate in a joint call explaining the decision?

Obviously, Mr. Sengupta’s history of successful acquisitions, operating performance, growth, and exit strategies within the BPO space is undeniable. From my perspective, together with his partners at CSP, he has assembled their most precious gem yet. My bet is that Aparup will achieve a successful exit strategy once again, and at the right time. And, as such, I took advantage of this dip in the stock price to increase my position.

Disclosure: I am/we are long SRT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have increased my long position after the new CEO announcement.

DISCLAIMER: Although the information contained herein has been obtained from sources that Omar A. Samalot believes to be reliable, he does not guarantee its accuracy and such information may be incomplete or condensed. All opinions and estimates included herein constitute his judgment as of this date and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. He, or persons involved in the preparation of this report, may from time to time have long or short positions in these securities, and may buy or sell these securities.

Copyright © Omar A. Samalot, 2019

Omar A. Samalot is an independent financial analyst that owns SRT shares as of the date of this report based on news, announcements, and his own analysis. The content of this report cannot be copied or distributed without the author’s written consent.

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