StarTek (SRT) Q1 2020 Earnings Call Transcript

StarTek (SRT)
Q1 2020 Earnings Call
Jun 10, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss StarTek's financial results for the quarter ended March 31, 2020. Joining us today are StarTek's chairman and CEO, Aparup Sengupta; the company's president, Rajiv Ahuja; and the company's CFO, Ramesh Kamath. Following their remarks, we'll open the call for your questions. Before we continue, we would like to remind all 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 to various risks and uncertainties that could cause actual results to differ materially. StarTek 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. StarTek does not undertake the responsibility to update any forward-looking statements. Further, the discussion today may include some non-GAAP measures.

In accordance with Regulation G, the company has reconciled these amounts back to the closest GAAP-based measurement. The reconciliations can be found in the earnings release on the Investors section of their website. I would like to remind everyone that a webcast replay of today's call will be available via the Investors section of the company's website at www.startek.com. Now, I would like to turn the call over to StarTek's executive chairman and global CEO, Aparup Sengupta.

Sir, please proceed.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Thank you very much, indeed, Latif. Good afternoon, everyone, and thank you all for joining. I would first like to acknowledge that we remain in uncertain and rapidly changing times as we navigate the COVID-19 pandemic. We extend our deepest sympathies to the families around the world who are dealing with the health and economic consequences of this tragic circumstances.

The world we live in today is not the same as we operated during the early months of 2020. So, we will keep our initial comments on the first quarter brief and will dedicate most of our time to discussing the current state of the business and what we are doing in response to COVID-19. Since the onset of the pandemic, our top priority has continued to be our employees' health and safety while providing ongoing support for our clients. Late March and early April were the most challenging periods for our business, as the sudden government-mandated lockdowns immediately impacted our operations.

During this period, we were operating with a fraction of our global workforce, with impacts from the pandemic varying by geography. However, I can proudly say that we have since taken very effective measures to partially offset the impact of this unprecedented challenge faced by the world. A key component of our response has been the implementation of our business continuity planning. We enabled many employees to work from home after obtaining necessary client approvals and we took a people-first approach to ensuring that our delivery campuses could operate under proper social distancing and safety standards.

Rajiv will have more to discuss on this topic as it was truly a remarkable feat to enable remote work in geographies like India, where many homes have limited access to computers and Wi-Fi. To mitigate the financial impacts to our business from COVID, we have continuously managed our operating costs prudently and cut all non-essential spending. Despite the workforce challenge related to COVID, our client demand has been very strong, particularly, with our largest verticals like telecom, e-commerce, cable media, and healthcare. We remain deeply committed to serving as a strategic partner to our clients and providing high-quality customer experiences in every region we serve whether it's home or in our delivery campuses.

We were extremely proud of our team members' coordination and hard work throughout this unprecedented times and we remain confident in the resiliency of our business going forward. But before commenting further, I would like to turn over the call to our CFO, Ramesh Kamath, to take you through StarTek's financial results for the quarter. Ramesh, over to you.

Ramesh Kamath -- Chief Financial Officer

Thank you, Aparup. I will mimic the structure of the opening remarks by keeping my review of our first-quarter brief. As we realize that the results for most of quarter one are now less relevant in today's environment. With that said, net revenues for the quarter were $160.9 million, compared to $161.1 million in the first quarter of 2019.

Net revenue in quarter one 2020 was impacted by government-mandated lockdowns in most of our geographies as we had to make several adjustments to properly equip our regional teams for remote work. Quarter one revenue was also affected by ForEx depreciation of approximately $7.2 million, primarily relating to the Argentinian peso. Gross profit for the quarter was $20.1 million, as compared to $27.2 million in the year-ago quarter with a gross margin percentage of 12.5%, compared to 16.9%. The decrease in gross margin was also driven by the sudden lockdowns in several geographies, such as India, the Philippines, and Honduras, where we continue to incur expenses, including payroll expense as directed by local governments, despite suspending operations for a period of time.

Selling, general, and administrative expenses decreased to $17.3 million, as compared to $24.1 million in the year-ago quarter. As a percentage of revenue, SG&A improved 220 -- 420 basis points to 10.7%, compared to 14.9% in the year-ago quarter, with the improvement driven by the series of cost reductions that we implemented over the last 12 months, as well as, an even sharper focus on prudent cost management at the onset of the pandemic. Net loss attributable to StarTek shareholders for the quarter was $26.6 million or a loss of $0.69 per share, as compared to a loss of $3.3 million that is $0.09 per share in the year-ago quarter. Net loss for the first quarter of 2020 included approximately $22.7 million goodwill impairment, primarily due to COVID-related forecasted declines in India, South Africa, and Australia.

Adjusted net loss for the first-quarter 2020 was $0.7 million or $0.02 per share, as compared to an adjusted net loss of $0.3 million or $0.01 per share in the first-quarter 2019. Adjusted EBITDA for the quarter was $10.5 million, as compared to $10.9 million, compared to the year-ago quarter. As a percentage of revenue, adjusted EBITDA was 6.5%, as compared to 6.7%. From a balance sheet perspective at March 31st, our cash and restricted cash increased to $39.7 million, compared to $32.6 million at December 31, 2019.

Our total debt at the end of the quarter was $175.2 million, as compared to $174.7 million at the end of 2019, and net debt was reduced to $135.5 million, as compared to $142.1 million. As we look in the months ahead, we will maintain our prudent approach to cost management and will actively monitor our working capital and cash flows to maintain adequate liquidity. As of today, we are comfortable with our liquidity and cash balance to navigate through this environment. With this, I've completed my prepared remarks, and Rajiv, over to you.

Rajiv Ahuja -- President

Thank you, Ramesh. As Aparup mentioned at the beginning of the call, our teams across the globe have done some incredible work to ensure that our personnel have the resources necessary to continue operating safely and effectively amid the pandemic. Their efforts are evident across our geographies, but I do want to highlight a couple of regions in particular where our teams showed incredible courage and commitment given the challenges that we faced. In India, for example, the work-from-home mandate initially posed a great challenge to our operating teams as many of our employees did not have the independent technological resources to immediately switch to working remotely.

We responded to these situations by providing many of them with laptops, desktops, Wi-Fi access, and similar tech-enabling equipment, all of which helped us to quickly resume our operations that continue to gradually improve even today. In the Philippines, we faced a similar set of challenges as much of our workforce in the country there is dispersed across areas that are far from our delivery campuses and often don't have consistent internet access. Also, the government only allowed employees to go to work if they lived within a 2- to 3-mile radius of the office locations. So, we had to temporarily provide housing nearby for many of our team members to enable them to continue servicing our clients from our campuses.

This initiative helped ensure that a majority of our team members had access to the resources they needed to be fully operational. All of this has been made possible by the phenomenal partnership and teamwork between operations, IT, facilities, and administration, in particular. When our team members are comfortable and well equipped, we know that our clients and their customers will be able to receive the same high-quality experience that we have always delivered. It is very clear to us that the resources we have committed over the last several quarters to build out a strong leadership team, coupled with the passion and dedication displayed by our teams on the ground is paying off, as are the investments we have made to improve our technology focus and global standard operating procedures.

As we look ahead, like most businesses around the world, we cannot predict the full impact from COVID-19, as the aftermath from the pandemic and its effect on the global economy still remains very uncertain. Nevertheless, we expect to continue adapting to the new environment accordingly, and we will continue to do all that we can to support our global workforce and client base as we collectively navigate a new normal through this period of volatility and uncertainty. Now, I'd like to pass the call back to Aparup for his closing remarks. Aparup?

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Thank you very much indeed, Rajiv. As a parting thought for today's call, I want to remind listeners that we came into 2020 with a very strong global blueprint, very efficient operations, and even stronger team. These elements drove our momentum heading into the first quarter, and they will be the key components of our ability to see through to the other side of this global pandemic. In the months ahead, we will continue to place our highest priority on supporting and protecting our global workforce while improving our position as a value-added strategic partner to our clients.

As more economies start to open, we are preparing ourselves to operate as efficiently as we can, and we plan to remain flexible with our campus operations and remote work extensions until we are certain of what the new normal will be. Despite the workforce challenges we have faced, we are fortunate to be in a position where the client demand for our services remain strong and our workforce is consistently increasing to meet the demand. From a financial perspective, we will maintain a strict focus on cost control. And as Ramesh mentioned earlier, we are comfortable with the cash balance and liquidity today.

I am proud of the swift and effective organizational pivots the team has made up to this point and we look forward to building upon this work in the quarters ahead. Latif, we will now open the call for any questions that people might have.

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] Our first question comes from the line of John Godin of Lake Street Capital. Your question, please.

John Godin -- Lake Street Capital -- Analyst

Hi, everyone. Thank you for taking my questions. First, if you could kind of peel the onion a little bit more on some of the verticals where you've seen strength, some where you've seen weakness. Has anything really stuck out or surprised you? And then second, thinking about feedback from clients, you know, what has it been like as your workforce has transitioned to work-from-home? Is anything else stuck out there and how the performance has been? And then third, just any commentary on overall volumes and utilization across the different verticals would be helpful.

Thanks.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Yeah, sure. I think, I'll take each of these questions one at a time. So, if you look at what we clearly faced is that a very interesting phenomenon is -- as the pandemic set in, the -- typically, non-discretionary or essential services continued to remain strong. And fortunately, we have a very significant part of our clients who are in largely essential services that people continue to use and they are kind of non-discretionary activities.

For example, making a phone call or switching on your television and so on and so forth. However, we have seen with -- overall in the industry, we have found that sectors such as airline travels, transportations, automobiles, they have gone through some challenges because those kind of discretionary expenses and this pandemic kind of created a huge amount of havoc for them, and there was a demand slowdown on that side. And with regards to the workforce and the volume pickup and the client, I would speak more on the client side. I mean, we found that clients were very receptive -- most of the clients were very receptive to our idea of getting into a work-from-home.

And I would request Rajiv to give you some additional color on that, including some understanding of volumes that we have seen that have panned out over the last few weeks. Over to you, Rajiv.

Rajiv Ahuja -- President

Thank you, Aparup. I think, you've covered it to a very large extent. I think, we've been fortunate to the extent that our exposure to sectors like airlines, especially, or hospitality for that matter, has been relatively low in comparison to some of our competitors, which is why the softness in demand is not as evident as it would be with some of our competitors. Over 70% of our revenue is driven by sectors that are considered essential in these current times, i.e., telecom, media and cable, BFSI, healthcare, etc.

So, we really haven't seen any softness in demand out there. Clients have been extremely receptive. At this point, I would say that business continuity probably overload any kind of concerns surrounding -- moving from a secure environment to a not-so-secure environment. But the solutions that we've put together to enable our work-from-home agents, we've got very robust solutions put together, and clients have now increasingly started becoming more and more comfortable with our ability to be able to go out and deliver to the desired extent.

When it comes to overall volumes and utilization, overall volumes did see a little bit of a hit as COVID -- the impact hit us somewhere around the middle of March, and the Philippines was among the first few geographies to go into lockdown followed by India. So, there was a little bit of an impact and Ramesh touched upon that during his remarks -- his opening remarks. But I'm happy to state at this point that we have enabled north of 75% of our workforce is live and productive today and is busy and engaged in serving our customers and their customers in turn.

John Godin -- Lake Street Capital -- Analyst

All right. That's helpful. And then one more on, kind of, the margin structure. I guess, can you give us any more color on how that was impacted in the quarter? And more importantly, do you anticipate kind of any longer-term impacts, whether positive or negative depending on kind of the moving parts that you've seen? Thank you.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Well, it will be very difficult to give you some exact estimates at this point in time, but I can only comment on the quarter that has gone by, and we had faced this pandemic challenge at the back end of the quarter. So -- and that's reflective of what Ramesh had mentioned. And what typically happens is that when you suddenly get a kind of a supply shrinkage you are not prepared basically at that point in time. So, what happens is you get overwhelmed with a lot of costs.

And then with the sudden shutdown, you get kind of almost like a blackout situation in the key geographies where employees just can't show up. Though there is pent-up volume with the client, but they just can't show up. So it was a heroic task, I would say that Rajiv and his entire team had worked out, where, over a period of several weeks, we could bring back the workforce in a completely new unknown territory of making them work from home, and that was, I would say, an incredible feat. And I think, we can proudly say this, one of the very few organizations could effectively switch gears from a brick-and-mortar center to almost a virtual center.

And most importantly, the entire leadership team kind of started working through a virtual command center, and that really helped in looking at every moment of truth, every action with military precision. So, I think that was something remarkable to come out of this. So sitting in the month of April, I mean, we are looking at something very scary, but by the sheer passion and the rigor and the effective management almost on a 24/7 basis, I think, we got this ship back on track. So that's what I can say at this point in time and these are uncertain times.

You will never know whether there's going to be something coming up in the future. But I think, we have stated the ship and we feel very comfortable and very proud of the entire team at StarTek. It's indeed a star team. Very proud of them.

John Godin -- Lake Street Capital -- Analyst

All right. Thank you. Congrats, everybody on all your efforts and stay healthy. Thanks.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Thank you very much.

Operator

Thank you. Our next question comes from Zach Cummins of B. Riley FBR. Your question, please.

Zach Cummins -- B. Riley FBR Inc. -- Analyst

Hi, good afternoon, everyone. Thanks for taking my questions. I guess, just building upon some of the prior questions. I mean, can you speak a little bit to the progress you've seen thus far through Q2 -- two months into the quarter? And I was just kind of curious on your approach by a geography-by-geography basis.

I mean, as I guess, countries such as India and the Philippines begin to relax some of their lockdown restrictions, what's going to be your approach to having employees remain working from home versus having more and more employees move back into your physical delivery campuses?

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Philosophically, I can give you an answer and I'll be turning over to Rajiv for some more clarification and light that he can throw upon. But what has happened is this whole pandemic was basically a shock for both our customers, as well as, for ourselves. One was the government-mandated lockdown, which means suddenly, I mean, there was nobody who would come to work and they could not show up. I mean, our technology was wired in a model that was hardwired into our centers wherever we have our locations and they were just vacant.

And I'm talking of thousands and thousands of people, both in India and Philippines. So while the customer is overwhelmed, the customer doesn't know what can be done, and we don't know how to get the employees back into the place. So it was a situation, I can say, in those days was between a rock and a hard place. But what we did together was, as a leadership team, we came down and said, how can we solve this problem for our customers.

The sheer passion of working with the customer to bring our workforce back even in the virtual world was an incredible task of desktop by desktop, line by line, agent by agent, making them enabled in the places like India and Philippines, where you don't have people who have desktops or laptops or infrastructure at their home. So it means the movement of goods of desktops, of infrastructure, and working at the back end with technology and virtualizing a wired infrastructure into a virtual environment was something which happened through a virtual command center, which was monitoring these activities on an hourly basis, on a daily basis. And thereafter, we could just bring this volume back as week passed by, as hours passed by, as days passed by, we just started bringing it back. It was a huge shrinkage we faced and it was a huge shock, but with sheer resilience, we brought it back.

There are more stories. There are more detailed nuggets. I would request Rajiv to speak to that, but this is what I've seen, and this is what the team has done. Rajiv, over to you, I mean, you might give some color on how did you enable all of those?

Rajiv Ahuja -- President

Sure, Aparup. So, Zach, let me start with yoiu know -- you wanted a little bit of a sense how this has played out across the different geographies that we are present in. So, our network today straddles 13 different geographies and if I start from the west, Jamaica for -- was probably among the last in our network to get affected by the virus. And then Jamaica got affected, went into total lockdown.

Jamaica, like a number of other developing nations around the world, does have challenges around internet penetration, bandwidth availability, and infrastructure issues. So, it -- moment -- but the good part was that because Jamaica was among the last to go down in our network, we already learned our lessons across some of the other geographies like India and Philippines where we had figured out how to quickly put together a solution where work could move from a brick-and-mortar to say the living room, which is work-at-home. U.S. and Canada, 100% of our workforce is fully operational between brick-and-mortar and remotely enabled.

Then, if I continue moving down further into LatAm, Honduras, Peru, Argentina also started going into lockdown, but happy to say that we managed to enable significant amount of our workforce to be able to be working remotely. And when it came to South Africa, again, faces the challenges that I just outlined for Jamaica, issues to do with internet penetration, internet connectivity, bandwidth availability, etc. So, it took us a little bit of time to bootstrap a larger amount of people that we would have liked to get them to work remotely. However, now South Africa is also up and running.

Saudi Arabia fully enabled between brick-and-mortar and our work-at-home solution. India, again, faced severe challenges, because again, on account of the one point, which I've already mentioned to do with these developing countries. The other being that the lockdown was being enforced extremely tightly to the extent that while they did call it a lockdown, it was almost like a curfew that had been imposed. That curfew, obviously, prevented people from moving.

By the time the government came around to opening up essential services and the IT-enabled services industry were -- did feature on that, but then, social distancing norms kicked in. So obviously, we had to rely more on firing up a larger amount, a larger percentage of our workforce to be working from home and that is the case currently in India. We replicated to a large extent, the same in the Philippines. Malaysia proved to be a bright spot for us.

There were lockdowns in place, but the government quickly announced that the IT-enabled services industry will be treated as essential services. And as such, the movement control order did not apply to the IT-enabled services industry, so, we saw very little impact in -- adverse impact in Malaysia. Australia, between work-at-home and brick-and-mortar, we are totally fired up. Almost 100% of our workforce is live and in production.

So that gives you a sense of the 13 geographies that we are present in. And when it comes to what do we see? Are we going to be relying more on work-at-home as we move forward? Absolutely, yes. I think, this pandemic has proven that work-at-home could prove to be -- with the right security protocols, etc. in place, could prove to be an extremely good and viable alternative to working from brick-and-mortar.

So, we do see this call center without walls now becoming more and more popular with clients in terms of their acceptance rates and our sales teams will also continue to focus on pushing for this as a part of our service offerings. Zach, I hope that broadly answers what you were looking for.

Zach Cummins -- B. Riley FBR Inc. -- Analyst

No, that's extremely helpful. I really appreciate all the incremental color. And I guess in terms of liquidity, I mean, you had actually saw net debt move down here in Q1. Of course, that was a shock to the system in April.

I was just kind of curious, if you could give us a sense of maybe where the cash balance was at the end of May? Or anything like that to give us a better sense of where you're at from a balance sheet standpoint?

Aparup Sengupta -- Chairman and Global Chief Executive Officer

See, Zach, as you know, as Finco, we have been working with our banks on the debt that we have in terms of our repayment schedule and also a very tight lease that we have taken into our cost management. Both this put together gives us, I would say, significant comfort for what we see in quarter two in terms of liquidity. And it keeps on changing by the week and what we saw in early months of April, maybe the first or second week of April, what we saw and what we see today is distinctively better from where it was. You know, I mean, this kind of shock can create havoc on liquidity.

And we understood that pretty much early on in the game and we did a lot of actions. And fundamentally, I would say the speed of action is the most important part in managing liquidity. It is not -- one, it is not a kind of a mathematical model that you see. It's a dynamic model that is a little bit non-linear in nature.

So, if you take actions proactively early on in the game, you will save money. If you don't, you lose. For example, if you have not taken action, 1,000 people will just get paid without getting any work to do and vice versa. So that strains the liquidity of the organization.

So, this whole idea of the virtual command center led by Rajiv that was put in place, ensured that every dollar that we spent was an effective dollar, was a productive dollar, and all non-productive dollars that were there were actually either delayed or deferred or eliminated. So while this happened on the cost side, we also started building our capability and capacity to create new service offerings and we became like a running R&D lab. As we were learning through the pandemic as to what are some of the nuggets that we can take to the marketplace. And therefore, we came stronger on that and that has helped our sales team and business development team.

And I can proudly say, which is being led by Rick Ferry, who has just come on board a few months back, is working overnight to ensure that we get deals to the door. And there has been some very significant success that we have achieved over the last three to four weeks on new logos and new businesses coming. And some of them are subscribing to this new idea of a hybrid model of a virtualized contact center, which is you can do a lift and shift and work anytime, anywhere for any client across geographies, across cultures, across continents. So that is something which we believe the upside of COVID, if I may use this word, is some of those learnings came out, and we therefore, feel very strong, motivated, and the concern that we had in April is not there.

I can only say as much as I could say qualitatively. Quantitatively, I will not be able to give an answer.

Zach Cummins -- B. Riley FBR Inc. -- Analyst

Understood. That's -- and then just final question for me. I know with moving to a virtual environment, it still requires approval from clients to perform those services. I was just wondering if you've had any issues getting those approvals, or any sort of delays with some key clients that could be impacting your business still.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Rajiv, can you answer this question? Specifically, give some color?

Rajiv Ahuja -- President

Certainly. So yes, I think if I was to broadly categorize it, I would say it is 80, 10 and 10, and I'll give you this -- why I'm saying 80, 10, 10. Eighty percent of our clients quickly came to the table and agreed to grant us the necessary waivers, etc. so as be able to help us fire up a work-at-home population.

Ten percent of the clients took a little bit of time and wanted to review the situation because at that point of time, I don't think anybody had any clarity as to how severe is this going to be? Will it actually turn out to be a pandemic? Would it be more of an internal epidemic? Or would it just be localized? And 10% of our clients were very clear and very firm that they would not prefer a work-at-home solution. Happy to say that out of that 10%, some of those clients have agreed now to a work-at-home solution being fired up. But what they have done is they've asked us to move from voice-based support to more chat-based support. But we do have a small segment of our client base, which currently still feels that work-at-home is something that they wouldn't like to walk that path as of now.

But 80% of our clients immediately wanted to turn this around quickly. They wanted to ensure business continuity at the earliest and that's how we were able to partner with them and quickly fire up a work-at-home solution.

Zach Cummins -- B. Riley FBR Inc. -- Analyst

Understood. Well, thank you for taking my questions and best of luck as we move forward from here.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Thanks, Zach.

Rajiv Ahuja -- President

Thank you, Zach.

Operator

Thank you. Our next question comes from the line of Dave Koning of Baird. Your line is open.

Dave Koning -- Robert W. Baird & Co. -- Analyst

Yeah. Hey, guys. Thank you. I guess, first of all, just when we think about how revenue is trending from Q1 to Q2, you talked about 75% of agents are up and running.

I mean, is it the easiest way just to think of that 25% of revenue goes away sequentially? I know 10% is travel. I would imagine a lot of that, just pretty quickly goes away. But is that kind of the right pace?

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Actually, mathematically, it will not be that. I mean, what happens is that -- I give you an idea of the headcount. But what happens is many of them also suddenly come back because as it opens, the volume which was pent-up and which was getting stuck in long wait times now get distributed to the ACD because now there is a logged in agent. So, it's a very dynamic function of how the agents come quickly and what is the pent-up kind of offered call that needs to be basically addressed.

So, that's not a very linear equation that if you have 75% of the stuff coming in, it has a direct bearing on the revenue per se. So if you take a quarterly look, I mean, it might appear that 75% is becoming 85% over a three-week period or a four-week period or a six-weeks period. It will all depend as to how fast they come back and whether you have the ability to get the same agent who were there come back to you because then you have to fire up a training cycle. So, it's a combination of a kind of a new batch of university students who are coming.

So, you can't say that the freshman year will have a 50% pass rate or a 75% pass rate. It depends on whether all of those ex-students who have completed those credits are coming on board, then, you can have a very linear map. But that's not how it basically pans out. Just to give you a little bit of example.

Let's say, 10 people had been working and suddenly because of lockdown, they just went away, they could not come. And many of them, maybe two of them have been enabled for work-from-home and eight the have not been enabled for work-from-home. They are figuring out and doing something else. Let's say, the volume comes back after one and a half months or two months, those may eight not be available.

So therefore, you have to go and train those eight again and get those workforce back on track. So, you will not be able to get the 75% back to 100% volume overnight. And by the way, you will also have to spend more money because you have to train and retrain some of those people. So, those dynamics of the economic modeling in this contact center plays out.

So, it will be very difficult for me to gauge as to based on that 75% or 80% workforce, therefore, we will be able to extrapolate the same number so far as the revenue is concerned. And this gets juxtaposed by the new sales that you have, for example, which during this crisis, we have also worked on enabling and onboarding clients and getting them up and running. So, they also add to the folder. So, it's a combination of all this put together.

So, we will have a clarity of that as we end this quarter. So, I can't give a prognosis at this point in time. But overall, it looks good.

Dave Koning -- Robert W. Baird & Co. -- Analyst

OK. Well, that's good. And just on the cost of services, if revenue -- I guess, whichever way revenue goes, if revenue goes down, I mean, are a lot of those costs of services fixed in the near term? Or should we expect it to be a little more like normal where your margins pretty quickly can get back to what has been kind of that 16%, 17%, right? I know it was 12.5% in Q1. I'm just kind of wondering what the margin trajectory as revenue eventually recovers.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Yeah, that's our goal to have as much elasticity as possible because a significant part of your cost is obviously agent cost. So that's the goal and that's what we drive to. And therefore, in this whole pandemic, we have tried to see how much of variabilization that we can do in our cost structure and those are some of the very interesting learnings we had. And it goes to excruciating details of all the line items that you see.

For example, if you have a bandwidth that is there for a center for 300 seats, and let's say, it's occupied by only 40% and not anymore, so you can turn off those bandwidth, talk and negotiate. We have a spend management team that negotiates and turns those off. So, all those vital points of basically getting into the depth of the economic modeling of our cost structure and working toward that. So today, I can say that while Ramesh Kamath is the CFO, but we have 50 COO-like people who are there in the operating team who are thinking like entrepreneurs, who are thinking like how can we save this dollar? This is wasteful.

This is -- can we negotiate with the landlord? Can we do this? Can we do that? So, all this kind of stuff has really worked in ensuring as much as possible to bring in elasticity in our business and that's why we are -- we were in a position that was very scary in the early days as to how this is going to pan out in terms of liquidity and other things. We today, stand a little taller than where we thought we will be in April and kudos to the wonderful team work that was led by Rajiv.

Dave Koning -- Robert W. Baird & Co. -- Analyst

Great and thank you.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from the line of analyst, Omar Samalot. Your line is open.

Omar Samalot -- Analyst

Thank you, guys. Thank you for --

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Hi, Omar.

Omar Samalot -- Analyst

Hi, how are you? Thank you for taking my questions. So, I did see an article from your CTO that mentioned that I think you had 55% of the global workforce move to a work-from-home platform. It was quite impressive, I thought, in such a short period of time. So I was wondering, how do you see that work-from-home portion fluctuate during more -- say, more normalized times? And I'm wondering about the cost impacts versus maintaining campuses, for example?

Aparup Sengupta -- Chairman and Global Chief Executive Officer

It's a very good question. We are also trying to grapple with those questions. I mean, the -- it's a wonderful journey, of course, from nowhere to somewhere to almost everywhere, I mean. And what I strongly believe is that we cannot have extreme views that, I mean, that tomorrow's world is going to be everything remote and work-from-home, and all the centers will go away and vice versa, that all work-from-home will go away, and everything will go back to the center.

It will be somewhere in between. It's like those classical debates we had that we will -- people will not travel once you get video conferencing up and running, people will travel. There's a need for organic exchange. There is a need for customers to come and visit a center and say hello to all their impassioned ambassadors who are servicing their clients.

It's -- at times, it's very difficult to do those when they are virtually spread apart. So there is economics, there is psychology, there is comfort. All these play as to how this thing is going to pan out. And within that, there are underlying layers of security, of loss of control, and some of those elements.

So, we don't know as to how this is going to unfold. But definitely, none of them are going to go away. So there will be work-from-home, there will be brick-and-motor. What's going to be the model is going to be a function of each individual client, their aspirations, and how they want to see.

And third layer is the preparedness of taking it into the cloud environment and that's what our technology team has worked is to create something like a star cloud. I mean, which is to create a cloud environment from nothing. We've had zero work-from-home agents. To do that in a six-weeks period, it was a running lab, I mean -- and where people really created that infrastructure and that virtualization.

So that's how I see. Rajiv, I think your views, I think we have always debated on that as to where it will go. And we can't bet on that and roll a roulette like a casino but these are some of the criteria I thought that comes to my mind off, and Rajiv, your views.

Rajiv Ahuja -- President

Thank you, Aparup. Hey, Omar. Excuse me, as a first step, I would certainly love to be a fly in the wall in the boardrooms of some of our larger clients, especially, where I'm sure these conversations are happening as to what the product mix or the workforce mix should look like moving forward. I suspect it's going to be a function of two lines and it will depend on where those two lines intersect.

One of those lines would be the risk appetite that a client has because, obviously, when you move work from a -- let's -- I'm calling it right now, a 100% secure location to a not-so-secure location, and that's the way clients approach work-from-home. And on the other hand, balancing it out with their need for business continuity and this pandemic has shown how something can come from so far left field and literally paralyze the world and bring it to its knees. So, I suspect demand moving forward will be a function of these two things. But I am -- you know, I feel pretty confident that work-from-home is going to form a part of the new normal.

To what extent, like Aparup rightly pointed out, I think each client will decide individually as of -- as we speak, we are in touch with our clients on a regular basis, trying to get a sense of what those numbers would look like. But the good part is that tomorrow, if a client says lockdowns have been lifted, social distancing norms, etc. now have been eased up, and we need to bring them back into our brick-and-mortar centers, we can do that literally on a 12-hour notice. And the even better part is if tomorrow a client turns around and says, I want 100% of my workforce to be operating from at-home -- you know, give me an at-home solution, like Aparup said, our Star cloud is up and running.

We've entered into partnerships with some very well-known brands all over the world and we can now fire up a at-home solution in almost six hours. So, I think that only time will tell what that mix would look like. But if you have any insight on that, I'm sure Aparup, Ramesh, and I would love to take some guidance from you.

Omar Samalot -- Analyst

Well, and the other question following that, it would be, obviously, the cost side. I guess, it would make common sense that, well, if work-from-home solution would probably be less costly, so, you don't have to pay rent. But at the same time, you have to somehow deal with the current capacity that you currently have that you have to pay for. So, I guess, it's kind of a balancing out there as well.

Rajiv Ahuja -- President

That is correct. And -- but to understand that -- let's pick any one center and let's -- and I'm just using this -- and I'm making it binary, just for the purposes of this discussion, that 100% of that workforce that existed out there, let's assume there were -- it was a 500 seater. We are told that all 500 move to a work-at-home solution. We would love to exit some of that expensive real estate, but then, we are also bound by the lease agreements, etc.

that are in place, but do know that our legal teams are examining with Ramesh and team, are examining -- have examined pretty much every lease that we have across the 49 sites that currently form a part of our network. And we've drawn up a complete mind map that in the event we need to go from brick-and-mortar to at-home, what all will it entail, how long will it take, we've mapped out the complete thing. So we will, obviously, look at how can we reduce some of those fixed costs. And like Aparup said earlier, move to a model where there's more variable -- where we can variabilize our costs as opposed to being large chunk of money on account of rent and utilities and a whole lot of other things that kick in when you run a big center.

Omar Samalot -- Analyst

OK. That's very helpful.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Yeah, and Omar, what will happen is that, I mean, as you have -- let's say, you have vacant capacity because now there's a work-from-home. So, there are two ways to look at it, that you have vacant capacity. One model is to exit, the other model is to fill it up, with -- which has to be a brick-and-mortar business. It cannot be work-from-home.

It's like telemedicine of outsourcing radiology, which is not that mission-critical to somewhere else, which can be done externally because it's a photograph being viewed by a qualified doctor as opposed to maybe surgery that has to be done in the hospital. So imagine that as a hospital and pharmacy kind of thing unfolding, depending on mission-critical activities like a very complex BFSI process, which involves calls, it involves credit cards, it involves a lot of other access to core banking or in the healthcare paradigm, getting into very critical conversations about customers' privacy, which necessarily cannot be take out because the screen displays some of the vitals of an individual. There are HIPAA regulations. So, all those kind of work will remain in a quarantined environment, sanitized environment in a militarized zone.

So, it's those brick-and-mortar centers will be required. So, the idea is that how cohesively this dynamic unfolding of inventories of how is work-from-home unfolding and how much is the vacant capacity, and what's the sales pipeline and how is the sales team working together as a team, is what I would call is a secret sauce of getting into an optimized environment. And that's quite dynamic in nature, but I feel very proud that with Rick coming on board and our team working as one Star team is giving us a lot of confidence that we are seeing in managing some of those uncertainties, if I may.

Omar Samalot -- Analyst

My follow-up question --

Rajiv Ahuja -- President

And, Aparup, if I may. I just had one more comment.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Go ahead, please.

Rajiv Ahuja -- President

To Omar's [Inaudible]. Omar, I also want to clarify to you that -- let's assume there is a situation where, again, I'm taking this example that I've given earlier, where 500 seater is emptied out totally and workforce has moved at home and let's assume there's 18 months more to go. We are very cognizant of the fact that the center is being paid for, the rent and utilities will have to continue to be paid for, the seats have been paid for, the infrastructure is in place, and that is the time -- it's not going to be that we're going to keep that center turn off the lights. We can always then do work off a marginal pricing as opposed to, say, an incremental pricing and then go and start sell the seats in that center for the duration that is left.

So, we are very, very cognizant of the fact that such spend will directly affect our bottom line, our ability to deliver value to our shareholders. So we will, obviously, be making sure we've covered, we've modeled a number of different scenarios, and we are fully cognizant of the fact that wherever we have centers, they have to be running at full capacity. And of course, on the side, we will try and continue to push an at-home solution because we feel that it is going to be a part of the new normal. It will have us -- it will -- there will be a significant component of work-at-home as we keep moving forward.

Omar Samalot -- Analyst

Got it. OK. OK. And then finally, I just wanted to touch on a previous question.

You know, when you were talking about measures that you were taking to maintain adequate liquidity. I think you mentioned the bank. So, I don't know if you're in a position to maybe talk about -- obviously, I don't know how much the impact of all this had on your restructuring efforts on that debt and if they're being receptive of any deferral payment or anything like that that you might need?

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Yeah. I can only say that we have had very good discussions with our lenders and they have been extremely supportive and they understand the current situation. We have kind of reached an in-principle agreement on the amendment to our facilities and we are now working with them on the documentation. And the moment we have information and agreement, we will definitely file an 8-K, and we'll get back to you.

Omar Samalot -- Analyst

Very good. Well, thank you, guys. Thank you very much and the best of luck.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Thank you, Omar.

Operator

Thank you. At this time, this concludes our question-and-answer session. I'd like to turn the call back over to Mr. Sengupta.

Please proceed.

Aparup Sengupta -- Chairman and Global Chief Executive Officer

OK. Thank you very much, indeed. I mean, it was a great question-answer session. And thank you very much, Latif.

And I really thank each one of you who have been on this call for joining this afternoon and for your continued support for StarTek, and I look forward to speaking to you with the next report and the second-quarter results. And Latif, thank you very much, and thank you, ladies and gentlemen. Really appreciate your and -- thank you. Thank you very much.

Operator

[Operator signoff]

Duration: 56 minutes

Call participants:

Aparup Sengupta -- Chairman and Global Chief Executive Officer

Ramesh Kamath -- Chief Financial Officer

Rajiv Ahuja -- President

John Godin -- Lake Street Capital -- Analyst

Zach Cummins -- B. Riley FBR Inc. -- Analyst

Dave Koning -- Robert W. Baird & Co. -- Analyst

Omar Samalot -- Analyst

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