Volt Information Sciences, Inc. (“Volt” or “the Company”)
(NYSE-MKT: VISI), an international provider of staffing
services and technology outsourcing services, today reported
results for its fiscal 2017 third quarter ended July 30, 2017. Key
highlights include:
- Net revenue of $289.9 million, down
12.3% or $40.7 million year-over-year; on a same store basis,
excluding net revenue contributed from businesses sold or exited
during the past year and the effect of foreign exchange rate
fluctuations, net revenue declined 7.2% year-over-year
- Gross margin percentage of 15.8%
increased 109 basis points year-over-year
- Operating loss of $1.5 million,
improved 26.4% or $0.5 million year-over-year
- Selling, administrative and other
operating costs of $46.9 million improved 5.3% year-over-year
Commenting on Volt’s third quarter performance, Michael Dean,
President and CEO, said, “While Volt’s third quarter results showed
continued evidence of improvements in several key financial and
operational metrics, our progress in driving revenue growth was
disappointing. During the quarter, we continued to benefit from our
focus on higher margin business with third quarter gross margins of
15.8% expanding once again on both a sequential quarter and
year-over-year basis. Third quarter selling, administrative and
other operating costs improved by 5.3%, or $2.6 million, compared
with the third quarter last year.”
Mr. Dean continued, “We continued to add to our book of business
with important new client relationships established in the quarter.
However, third quarter revenues of $289.9 million fell short of our
expectations. Initiatives are underway to improve our revenue
performance in future periods and I am confident we can
successfully meet our challenges to achieve sustainable profitable
growth.”
Fiscal 2017 Third Quarter Results
Total revenue for the fiscal 2017 third quarter was $289.9
million, down $40.7 million, or 12.3%, compared to $330.6 million
in the third quarter of fiscal 2016. On a same store basis,
excluding net revenue contributed from businesses sold or exited
during the past year of $17.1 million and the effect of currency
fluctuations of $1.3 million, net revenue declined 7.2%
year-over-year.
North American Staffing revenue, which provides a broad spectrum
of contingent staffing, direct placement, recruitment process
outsourcing and other employment services, was $229.4 million, a
$20.3 million, or 8.2% decrease compared to North American Staffing
revenue of $249.7 million in the third quarter of fiscal 2016. The
decline was primarily driven by lower demand from customers in both
professional and commercial job families, largely associated within
the aerospace industry and a significant change in a transportation
manufacturing client's contingent labor strategy.
International Staffing revenue, which includes the Company’s
contingent staffing, direct placement and managed service programs
businesses in Europe and Asia, was $29.0 million, a $3.5 million,
or 10.9% decrease compared to $32.5 million from the third quarter
of fiscal 2016, partially as a result of softening economic demand
in the United Kingdom as well as foreign exchange rate fluctuations
of $1.3 million. On a constant currency basis, International
Staffing revenue decreased $2.2 million, or 7.2%,
year-over-year.
Technology Outsourcing Services and Solutions revenue, which
provides quality assurance, business intelligence and analytics and
customer service support for companies in a variety of industries,
was $24.3 million, up $0.5 million, or 2.0%, compared to $23.8
million in the prior year period, primarily due to an increase in
customer care call center services demand, partially offset by
lower volume in our quality assurance testing services.
Corporate and Other revenue, which primarily consists of the
Company’s North American managed service business was $9.0 million,
down $18.2 million, or 66.8%, compared to $27.2 million in the
third quarter of fiscal 2016. The year-over-year revenue decline
was primarily driven by the impact from the sale of Maintech, which
occurred early in the second quarter of 2017. On a same store
basis, excluding businesses sold or exited of $17.1 million,
Corporate and Other revenue decreased $1.1 million, or 10.9%,
year-over-year.
Selling, administrative and other operating costs in the third
quarter of fiscal 2017 decreased $2.6 million, or 5.3%, to $46.9
million from $49.5 million in the third quarter of fiscal 2016.
This decrease was primarily due to the sale of Maintech and the
release of a reserve related to the dissolution of the Employee
Welfare Medical Trust as well as reduced costs and improved
operational efficiencies partially offset by higher IT costs
related to the Company’s technology upgrade.
Net loss of $5.5 million in the third quarter of fiscal 2017
increased by $0.9 million, or 19.7%, from the third quarter of
fiscal 2016. Excluding the impact from special items of $0.3
million, net loss for the third quarter of 2017 would have been
$5.8 million on a Non-GAAP basis.
Adjusted EBITDA, which is a Non-GAAP measure, was $1.4 million
in the fiscal 2017 third quarter, up $0.7 million, or 91.2% from
$0.7 million (Non-GAAP) in the year ago period. Adjusted EBITDA
excludes the impact of special items, interest expense, income
taxes, depreciation and amortization expense, other income/loss and
share-based compensation expense. For a reconciliation of the GAAP
and Non-GAAP financial results, please see the tables at the end of
this press release.
Liquidity
On July 14, 2017, the Company amended its Financing Program with
PNC Bank National Association (“PNC”) to increase the permitted
ratio of delinquent receivables to 2.5% from 2.0% for the period of
July 2017 through September 2017.
Subsequent to the end of the quarter, on August 25, 2017, the
Company further amended its Financing Program to adjust its
financial covenants by: (1) lowering the required liquidity level
amount, as defined therein, to $5.0 million from $25.0 million, and
(2) lowering minimum targets for the Company’s earnings before
interest and taxes for the fiscal quarter ended July 30, 2017 and
the fiscal quarter ending October 29, 2017. The amendment also
establishes a minimum $10.0 million block on the Company’s
borrowing availability through the current term of the Financing
Program.
These amendments provide the flexibility needed as we resolve
certain temporary billing issues that impacted our liquidity during
the post implementation phase of our information technology
upgrade.
As of September 1, 2017, the Company had $38.9 million of global
liquidity for working capital requirements as compared to $55.9
million in the prior quarter.
Conference Call and Webcast
A conference call and simultaneous webcast to discuss the fiscal
2017 third quarter financial results will be held today at 4:30
p.m. Eastern Time / 1:30 p.m. Pacific Time. Volt’s President and
CEO Michael Dean and CFO Paul Tomkins will host the conference
call. Participants may listen in via webcast by visiting the
Investor & Governance section of Volt’s website at
www.volt.com. Please go to the website at least 15 minutes early to
register, download and install any necessary audio software. The
conference call can also be accessed by dialing 877-407-9039
(201-689-8470 for international callers) and reference the "Volt
Information Sciences Earnings Conference Call."
Following the call, an audio replay will be available beginning
Thursday, September 7, 2017 at 7:30 p.m. Eastern Time through
Thursday, September 21, 2017 at 11:59 p.m. Eastern Time. To access
the replay, dial 844-512-2921 (412-317-6671 for international
callers) and enter the Conference ID # 13668325. A replay of the
webcast will also be available for 90 days upon completion of the
call, accessible through the Company's website
at www.volt.com in the Investors & Governance
section.
About Volt Information Sciences, Inc.
Volt Information Sciences, Inc. is a global provider of staffing
services (traditional time and materials-based as well as
project-based), managed service programs and technology outsourcing
services. Our staffing services consists of workforce solutions
that include providing contingent workers, personnel recruitment
services, and managed staffing services programs supporting
primarily professional administration, technical, information
technology, light-industrial and engineering positions. Our managed
service programs consist of managing the procurement and
on-boarding of contingent workers from multiple providers. Our
technology outsourcing services assist with individual customer
assignments, as well as customer care call centers and gaming
industry quality assurance testing services. Our complementary
businesses offer customized talent, technology and consulting
solutions to a diverse client base. Volt services global industries
including aerospace, automotive, banking and finance, consumer
electronics, information technology, insurance, life sciences,
manufacturing, media and entertainment, pharmaceutical, software,
telecommunications, transportation, and utilities. For more
information, visit www.volt.com.
Forward-Looking Statements
This press release contains forward-looking statements that are
subject to a number of known and unknown risks, including, among
others, general economic, competitive and other business
conditions, the degree and timing of customer utilization and rate
of renewals of contracts with the Company, and the degree of
success of business improvement initiatives that could cause actual
results, performance and achievements to differ materially from
those described or implied in the forward-looking statements.
Information concerning these and other factors that could cause
actual results to differ materially from those in the
forward-looking statements are contained in company reports filed
with the Securities and Exchange Commission. Copies of the
Company’s latest Annual Report on Form 10-K and subsequent
Quarterly Reports on Form 10-Q, as filed with the Securities and
Exchange Commission, are available without charge upon request to
Volt Information Sciences, Inc., 1133 Avenue of the Americas, New
York, New York 10036, Attention: Shareholder Relations. These and
other SEC filings by the Company are also available to the public
over the Internet at the SEC’s website at http://www.sec.gov and at
the Company’s website at http://www.volt.com in the Investor &
Governance section.
Results of
Operations (in thousands, except per share data)
(Unaudited) Three Months Ended Nine Months
Ended July 30, 2017 April 30, 2017 July 31,
2016 July 30, 2017 July 31, 2016 Net
revenue $ 289,924 $ 303,005 $ 330,625 $ 905,953 $ 993,169 Cost
of services 244,205 255,886
282,098 766,225 847,602
Gross
margin 45,719 47,119 48,527 139,728
145,567 Expenses: Selling, administrative and
other operating costs 46,931 51,171 49,543 146,992 153,294
Restructuring and severance costs 249 199 970 1,072 4,571
Impairment charge - 290 - 290 - Gain from divestitures -
(3,938 ) - (3,938 )
(1,663 )
Total expenses 47,180 47,722
50,513 144,416 156,202 Operating
loss (1,461 ) (603 ) (1,986
) (4,688 ) (10,635 )
Interest income (expense), net (976 ) (891 ) (826 ) (2,725 ) (2,346
) Foreign exchange gain (loss), net (1,730 ) 184 (1,003 ) (1,419 )
(1,238 ) Other income (expense), net (277 ) (311 )
(402 ) (1,187 ) (1,101 )
Loss before income
taxes (4,444 ) (1,621 )
(4,217 ) (10,019 ) (15,320
) Income tax provision (benefit) 1,074
(767 ) 393 930 2,037
Net loss $ (5,518 ) $
(854 ) $ (4,610 ) $
(10,949 ) $ (17,357 )
Per share data: Basic: Net loss $ (0.26 ) $ (0.04 ) $
(0.22 ) $ (0.52 ) $ (0.83 ) Weighted average number of shares
20,963 20,921 20,846 20,934 20,824
Diluted: Net loss
$ (0.26 ) $ (0.04 ) $ (0.22 ) $ (0.52 ) $ (0.83 ) Weighted average
number of shares 20,963 20,921 20,846 20,934 20,824
Segment data: Net revenue: North American
Staffing $ 229,372 $ 233,804
$ 249,730 $ 695,041 $ 739,186 International Staffing 29,018 30,231
32,565 89,599 99,766 Technology Outsourcing Services and Solutions
24,323 24,499 23,857 74,493 76,052 Corporate and Other 9,042 16,033
27,206 51,371 87,201 Eliminations (1,831 ) (1,562 )
(2,733 ) (4,551 ) (9,036 )
Net revenue
$ 289,924 $ 303,005
$ 330,625 $ 905,953
$ 993,169 Operating income
(loss): North American Staffing $ 5,741 $ 3,058 $ 6,685 $
11,627 $ 12,555 International Staffing 731 531 867 1,904 1,572
Technology Outsourcing Services and Solutions 972 1,075 (892 )
3,633 2,411 Corporate and Other (8,905 ) (9,205 ) (8,646 ) (25,790
) (28,836 ) Gain from divestitures - 3,938
- 3,938 1,663
Operating loss $ (1,461 ) $
(603 ) $ (1,986 ) $
(4,688 ) $ (10,635 )
Work days 63 65 63 187
187
Effective in the first quarter of fiscal 2017, in an effort to
simplify and refine our internal reporting, the Company modified
its intersegment sales structure between North American Staffing
and Technology Outsourcing Services and Solutions segments.
Accordingly, all prior periods have been recast to reflect the
current segment presentation.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited) Nine Months
Ended July 30, 2017 July 31, 2016 Cash
and cash equivalents, beginning of the period $
6,386 $ 10,188 Cash used in all other
operating activities (6,612 ) (12,745 ) Changes in operating assets
and liabilities 3,574 11,430
Net
cash used in operating activities (3,038 )
(1,315 ) Proceeds from divestitures
15,224 36,648 Net cash used in all other investing activities
(6,971 ) (14,041 )
Net cash provided by investing
activities 8,253 22,607
Repayment of long-term debt - (7,295 ) Net cash
provided by (used in) all other financing activities 2,155
(8,761 )
Net cash provided by (used in) financing
activities 2,155 (16,056
) Effect of exchange rate changes on cash and cash
equivalents 2,601 (2,538 ) Net
increase in cash and cash equivalents 9,971
2,698 Cash and cash
equivalents, end of the period $ 16,357
$ 12,886 Cash paid during the
period: Interest $ 2,815 $ 2,436 Income taxes $ 2,256 $ 3,727
Condensed Consolidated Balance Sheets
(in thousands, except share amounts) July 30,
2017 October 30, 2016 ASSETS (unaudited)
CURRENT ASSETS: Cash and cash equivalents $ 16,357 $ 6,386
Restricted cash and short-term investments 20,850 13,948 Trade
accounts receivable, net of allowances of $881 and $801,
respectively 195,893 193,866 Recoverable income taxes 3,498 16,979
Other current assets 11,636 11,806 Assets held for sale 698
17,580
TOTAL CURRENT ASSETS
248,932 260,565 Other assets, excluding current
portion 26,638 25,767 Property, equipment and software, net
31,914 30,133
TOTAL ASSETS $
307,484 $ 316,465
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accrued compensation $ 27,088 $ 29,147 Accounts
payable 40,726 32,425 Accrued taxes other than income taxes 21,830
22,791 Accrued insurance and other 29,095 34,306 Short-term
borrowings 100,000 2,050 Liabilities held for sale 346
5,760
TOTAL CURRENT LIABILITIES
219,085 126,479 Accrued insurance and other,
excluding current portion 10,467 9,999 Deferred gain on sale of
real estate, excluding current portion 24,650 26,108 Income taxes
payable, excluding current portion 5,500 6,777 Deferred income
taxes 3,137 3,137 Long-term debt - 95,000
TOTAL LIABILITIES 262,839 267,500
Commitments and contingencies
STOCKHOLDERS'
EQUITY Preferred stock, par value $1.00; Authorized - 500,000
shares; Issued - none - - Common stock, par value $0.10; Authorized
- 120,000,000 shares; Issued - 23,738,003 shares; Outstanding -
21,008,964 and 20,917,500 shares, respectively 2,374 2,374 Paid-in
capital 78,044 76,564 Retained earnings 8,067 21,000 Accumulated
other comprehensive loss (5,890 ) (10,612 ) Treasury stock, at
cost; 2,729,039 and 2,820,503 shares, respectively (37,950 )
(40,361 )
TOTAL STOCKHOLDERS' EQUITY
44,645 48,965 TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $ 307,484
$ 316,465 GAAP to
Non-GAAP Reconciliations (in thousands)
Three Months Ended July 30, 2017 July 31, 2016
Reconciliation of GAAP net loss to Non-GAAP net loss: GAAP
net loss $ (5,518 ) $ (4,610 ) Selling, administrative and other
operating costs (486 )
(a)
(486 ) (a) Restructuring and severance costs 249
(b)
970 (b) Non-GAAP net loss $ (5,755 ) $ (4,126 )
Three Months Ended July 30, 2017 July 31,
2016 Reconciliation of GAAP net loss to Adjusted EBITDA:
GAAP net loss $ (5,518 ) $ (4,610 ) Selling, administrative and
other operating costs (486 )
(a)
(486 ) (a) Restructuring and severance costs 249
(b)
970 (b) Depreciation and amortization 2,238 1,484 Share-based
compensation expense 869 755 Total other (income) expense, net
2,983 2,231 Provision for income taxes 1,074
393 Adjusted EBITDA $ 1,409 $ 737
Special
item adjustments consist of the following: (a)
Relates to the amortization of the gain on
the sale of the Orange, CA facility, which is included in Selling,
administrative and other operating costs.
(b) Relates primarily to Company-wide cost reduction plan
implemented in the first quarter of fiscal 2016.
Note Regarding the Use of Non-GAAP Financial Measures
The Company has provided certain Non-GAAP financial information,
which includes adjustments for special items and certain line items
on a constant currency basis, as additional information for its
segment revenue, consolidated net income (loss), segment operating
income (loss) and Adjusted EBITDA. These measures are not in
accordance with, or an alternative for, generally accepted
accounting principles (“GAAP”) and may be different from Non-GAAP
measures reported by other companies.
The Company believes that the presentation of Non-GAAP measures
on a constant currency basis and eliminating special items provides
useful information to management and investors regarding certain
financial and business trends relating to its financial condition
and results of operations because they permit evaluation of the
results of the Company without the effect of currency fluctuations
or special items that management believes make it more difficult to
understand and evaluate the Company’s results of operations.
Special items include impairments, restructuring and severance as
well as certain income or expenses not indicative of the Company’s
current or future period performance and are more fully disclosed
in the tables.
Adjusted EBITDA is defined as earnings or loss before interest,
income taxes, depreciation and amortization (“EBITDA”) adjusted to
exclude share-based compensation expense as well as the special
items described above.
Adjusted EBITDA is a performance measure rather than a cash flow
measure. The Company believes the presentation of Adjusted EBITDA
is relevant and useful for investors because it allows investors to
view results in a manner similar to the method used by
management.
Adjusted EBITDA has limitations as an analytical tool and should
not be considered in isolation from, or as a substitute for,
analysis of the Company’s results of operations and operating cash
flows as reported under GAAP. For example, Adjusted EBITDA: does
not reflect capital expenditures or contractual commitments; does
not reflect changes in, or cash requirements for, the Company’s
working capital needs; does not reflect the interest expense, or
the cash requirements necessary to service the interest payments,
on the Company’s debt; and does not reflect cash required to pay
income taxes.
The Company’s computation of Adjusted EBITDA may not be
comparable to other similarly titled measures computed by other
companies because all companies do not calculate these measures in
the same fashion.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170907006520/en/
Investor Contacts:Volt Information Sciences,
Inc.voltinvest@volt.comorAddo Investor RelationsLasse Glassen,
424-238-6249lglassen@addoir.com
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