Volt Information Sciences Reports Fiscal 2017 Third Quarter
Financial Results
NEW YORK, NY, September 7, 2017 – 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.
Volt Information Sciences Reports Fiscal 2017 Third Quarter Results
September 7, 2017
Page 3 of 9
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.
Volt Information Sciences Reports Fiscal 2017 Third Quarter Results
September 7, 2017
Page 4 of 9
Investor Contacts:
Volt Information Sciences, Inc.
voltinvest@volt.com
Lasse Glassen
Addo Investor Relations
lglassen@addoir.com
424-238-6249
--Financial Tables to Follow--
Volt Information Sciences Reports Fiscal 2017 Third Quarter Results
September 7, 2017
Page 5 of 9
| 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.
Volt Information Sciences Reports Fiscal 2017 Third Quarter Results
September 7, 2017
Page 6 of 9
| 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 | |
Volt Information Sciences Reports Fiscal 2017 Third Quarter Results
September 7, 2017
Page 7 of 9
| 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 | |
Volt Information Sciences Reports Fiscal 2017 Third Quarter Results
September 7, 2017
Page 8 of 9
| 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 | | |
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.
