- Net revenue of $117.6 million decreased
2.0% versus Q2 of fiscal year 2016
- Gross margin of 9.5% improved by 650
basis points versus Q2 of fiscal year 2016
- Operating expenses of $12.7 million
declined by 17.1% versus Q2 of fiscal year 2016
- Operating loss of $1.5 million, a $10.2
million improvement versus Q2 of fiscal year 2016
- Net loss of $2.9 million, an $11.0
million improvement versus Q2 of fiscal year 2016
- Adjusted EBITDA of $3.4 million, an
improvement of $10.4 million versus Q2 of fiscal year 2016
- Company’s turnaround plan is on track,
delivering expected savings and annualized EBITDA improvements of
approximately $32.0 million
ModusLink Global Solutions™, Inc. (the “Company” or “ModusLink”)
(NASDAQ: MLNK), announced today its financial results for its
second quarter of fiscal year 2017 ended January 31, 2017. Results
for the three and six months ended January 31, 2017 are summarized
in the following paragraphs. For a full discussion of the results,
please see the Company’s Form 10-Q filed with the Securities and
Exchange Commission, which can be accessed
through www.moduslink.com.
ModusLink will soon be publishing its second quarter of fiscal
year 2017 Investor Presentation, which will be posted in the
Investor Relations section of the Company’s website. The Investor
Presentation will also be filed as an exhibit on Form 8-K with the
Securities and Exchange Commission. Investors, customers and
partners are encouraged to review this presentation as it
corresponds with the Company’s financial results for the second
quarter and six months of fiscal year 2017, and includes additional
information on the Company’s results of operations, balance sheet,
turnaround plan, and corporate strategy.
Commenting on the Company’s financial results and operational
performance, Jim Henderson, Chief Executive Officer of ModusLink
stated, “Our results through the first half of the year demonstrate
that our turnaround plan is working. By de-centralizing corporate
functions, improving processes and investing throughout our global
footprint, we have successfully enhanced gross margins, lowered
expenses and reduced our losses significantly. We are operating
more efficiently and our clients are the ones who are benefitting
the most. I’m pleased with the progress we have made to date and
fully expect the second half of fiscal 2017 to show continued
momentum. We remain on track to realize $32 million in annualized
EBITDA improvements and our goal remains to bring ModusLink back to
profitability.”
Mr. Henderson continued, “Since we launched our turnaround plan,
we have focused mostly on bringing domain expertise directly to our
sites to improve our ability to service clients on a global scale.
We maintain this continuous improvement mindset and are now focused
equally on revenue stabilization and growth. Our teams have been
concentrating on servicing and growing with existing clients, while
promoting our end-to-end capabilities to capture new clients. Key
to all of this is operational excellence and with a stronger
foundation in place, we are confident that we will deliver. We look
forward to reporting on our continued progress in the quarters
ahead.”
Second Quarter and Year-to-Date Financial
Results Summary
Net RevenueThe Company reported net revenue of $117.6
million for the second quarter of fiscal year 2017, as compared to
$120.0 million for the same period in the prior year. The
year-over-year decline of 2.0% is primarily related to decreases
with select clients in the consumer electronics industry, offset by
higher volumes and revenue associated with several new and existing
clients. On a geographic basis, net revenue in Europe increased by
$6.3 million or 16.2%, which partially offset lower net revenue in
the Americas and Asia, and in the Company’s e-Business segment.
The Company reported net revenue of $238.9 million for the six
months ended January 31, 2017, as compared to $261.1 million for
the same period last year. Net revenue in Europe increased by $6.7
million or 8.0%, which offset declines in the Americas, Asia and in
the e-Business segment. This was primarily due to two clients in
the consumer electronics industry which adversely impacted net
revenues due to lower volumes. Furthermore, as the Company has
focused on generating new programs with existing clients and adding
new logos throughout its global footprint, the rate of the revenue
decline on a consolidated basis has lessened when comparing against
the year-over-year declines in the first quarter of fiscal year
2017.
Gross MarginGross margin for the period ended January 31,
2017 was 9.5%, as compared to 3.0% for the same period in the prior
year, an improvement of 650 basis points. The improvement in gross
margin was driven primarily by enhancements in the Company’s supply
chain operations, as well as lower labor costs in Asia and the
Americas, which are a direct result of various turnaround
initiatives.
For the six months ended January 31, 2017, gross margin was 8.6%
as compared to 6.2% for the six months ended January 31, 2016, an
improvement of 240 basis points. This was driven primarily by a
reduction in labor costs, improved client mix and process
enhancements, partially offset by lower revenues. Gross margin for
the comparable fiscal year 2017 and 2016 six-month periods also
improved in each of the Company’s reportable operating segments –
Americas, Asia, Europe, and e-Business.
Operating ExpensesTotal operating expenses for the second
quarter of fiscal year 2017 were $12.7 million, as compared to
$15.3 million in the same period in the prior year, a reduction of
$2.6 million or 17.1%. Selling, general and administrative
(“SG&A”) expenses for the second quarter of fiscal year 2017
were $11.9 million, a reduction of $2.8 million or 19.3%, as
compared to the comparable prior year period. Driving the reduction
in SG&A were lower employee related costs associated with the
Company’s ongoing turnaround initiatives, as well as lower
professional fees. SG&A expenses also declined for all
reportable business segments when comparing the fiscal year 2017
and fiscal year 2016 second quarters.
Total operating expenses for the six months ended January 31,
2017 were $27.7 million, as compared to $29.3 million in the same
period in the prior year, a reduction of $1.7 million or 5.7%.
SG&A expenses for the first six months of fiscal year 2017 were
$25.5 million, a reduction of $2.3 million or 8.1% as compared to
the comparable six-month period in fiscal year 2016. Included in
the fiscal year 2016 six-month period was a gain of $1.2 million
related to the sale of a building in Europe. The balance of the
reduction was attributable to lower employee-related costs
associated with turnaround initiatives, cost containment programs
and lower professional fees associated with outsourced
services.
For the second quarter of fiscal year 2017, net restructuring
expenses were approximately $0.8 million as compared to $0.2
million in the comparable fiscal year 2016 period. For the six
months ended January 31, 2017, net restructuring expenses were
approximately $2.2 million, as compared to $1.2 million for the six
months ended January 31, 2016.
Operating Income (Loss)The Company reported an operating
loss of $1.5 million for the second quarter of fiscal year 2017, as
compared to an operating loss of $11.7 million for the same period
in the prior year, an improvement of $10.2 million. Operating loss
for the six months ended January 31, 2017 was $7.1 million, as
compared to an operating loss of $13.2 million in the six-month
period ended January 31, 2016, an improvement of $6.1 million. The
year-over-year improvement for both the three- and six-month
periods was primarily attributable to higher gross margin and lower
operating expenses, which were direct results of the Company’s
turnaround initiatives.
Net Income (Loss)The Company reported a net loss of $2.9
million or a net loss per basic and diluted share of $0.05 for the
second quarter of fiscal year 2017. This compares to a net loss of
$13.9 million or a loss per basic and diluted share of $0.27 for
the same period in the prior year. For the six months ended January
31, 2017, the Company reported a net loss of $11.4 million or a net
loss per basic and diluted share of $0.21. This compares to a net
loss of $28.7 million or a loss per basic and diluted share of
$0.55 in the comparable six-month period in fiscal year 2016.
EBITDA and Adjusted EBITDAFor the three months ended
January 31, 2017, the Company reported Earnings Before Interest,
Taxes, Depreciation and Amortization (“EBITDA”) of $2.0 million, as
compared to negative EBITDA of $(9.2) million for the three months
ended January 31, 2016, a year-over-year improvement of $11.1
million. For the six months ended January 31, 2017, the Company
reported negative EBITDA of $(1.6) million, as compared to negative
EBITDA of $(18.5) million in the comparable year-ago period in the
prior year, an improvement of $16.9 million.
For the three months ended January 31, 2017, the Company
reported Adjusted EBITDA of $3.4 million as compared to negative
Adjusted EBITDA of $(7.0) million in the comparable year-ago
period, an improvement of $10.4 million. For the six months ended
January 31, 2017, the Company reported Adjusted EBITDA of $1.8
million as compared to an Adjusted EBITDA loss of $(5.1) million in
the comparable period in the prior year, an improvement of $6.9
million.
About ModusLink Global Solutions, Inc.ModusLink Global
Solutions, Inc. (NASDAQ: MLNK), through its wholly-owned
subsidiaries, ModusLink Corporation and ModusLink PTS, Inc.
(together “ModusLink"), executes comprehensive supply chain and
logistics services that are designed to improve clients’ revenue,
cost, sustainability, and customer experience objectives. ModusLink
is a trusted and integrated provider to the world’s leading
companies in consumer electronics, communications, storage,
computing, software, and retail. ModusLink’s operations are
supported by 21 sites across North America, Europe, and the
Asia/Pacific region. For details on ModusLink’s flexible and
scalable solutions visit www.moduslink.com and
www.valueunchained.com, the blog for supply chain
professionals.
Supplemental Non-GAAP Disclosures EBITDA and Adjusted EBITDA
(Unaudited)
In addition to the financial measures prepared in accordance
with generally accepted accounting principles, the Company uses
EBITDA and Adjusted EBITDA, non-GAAP financial measures, to assess
its performance. EBITDA represents earnings before interest income,
interest expense, income tax expense, depreciation, and
amortization of intangible assets. We define Adjusted EBITDA as
EBITDA excluding the effects of SEC inquiry and financial
restatement costs, strategic consulting and other related
professional fees, executive severance and employee retention,
restructuring, share-based compensation, impairment of goodwill and
long-lived assets, unrealized foreign exchange gains and losses,
net, other non-operating gains and losses, net, and gains and
losses on investment in affiliates and impairments.
We believe that providing EBITDA and Adjusted EBITDA to
investors is useful, as these measures provide important
supplemental information of our performance to investors and
permits investors and management to evaluate the operating
performance of our core supply chain business. We use EBITDA and
Adjusted EBITDA in internal forecasts and models when establishing
internal operating budgets, supplementing the financial results and
forecasts reported to our Board of Directors, determining a
component of incentive compensation for executive officers and
other key employees based on operating performance and evaluating
short-term and long-term operating trends in our core supply chain
business. We believe that EBITDA and Adjusted EBITDA financial
measures assists in providing an enhanced understanding of our
underlying operational measures to manage the core supply chain
business, to evaluate performance compared to prior periods and the
marketplace, and to establish operational goals. We believe that
these non-GAAP financial adjustments are useful to investors
because they allow investors to evaluate the effectiveness of the
methodology and information used by management in our financial and
operational decision-making.
EBITDA and Adjusted EBITDA are non-GAAP financial measures and
should not be considered in isolation or as a substitute for
financial information provided in accordance with U.S. GAAP. These
non-GAAP financial measures may not be computed in the same manner
as similarly titled measures used by other companies.
A table reconciling the Company’s EBITDA and Adjusted EBITDA to
its GAAP net income (loss) is included in this release.
ModusLink Global Solutions is a registered trademark of
ModusLink Global Solutions, Inc. All other company names and
products are trademarks or registered trademarks of their
respective companies.
Forward-Looking Statements & Use of Non-GAAP
MeasuresThis release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Statements in this release that are not historical facts are
hereby identified as “forward-looking statements” for the purpose
of the safe harbor provided by Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. All statements other than statements of
historical fact, including without limitation, those with respect
to the Company’s goals, plans, expectations and strategies set
forth herein are forward-looking statements. The following
important factors and uncertainties, among others, could cause
actual results to differ materially from those described in these
forward-looking statements: the Company’s ability to execute on its
business strategy, including any cost reduction plans and the
continued and increased demand for and market acceptance of its
services, which could negatively affect the Company’s ability to
meet its revenue, operating income and cost savings targets,
maintain and improve its cash position, expand its operations and
revenue, lower its costs, improve its gross margins, reach and
sustain profitability, reach its long-term objectives and operate
optimally; failure to realize expected benefits of restructuring
and cost-cutting actions; the Company’s ability to preserve and
monetize its net operating losses; difficulties integrating
technologies, operations and personnel in accordance with the
Company’s business strategy; client or program losses; demand
variability in supply chain management clients to which the Company
sells on a purchase order basis rather than pursuant to contracts
with minimum purchase requirements; failure to settle disputes and
litigation on terms favorable to the Company; risks inherent with
conducting international operations; and increased competition and
technological changes in the markets in which the Company competes.
For a detailed discussion of cautionary statements and risks that
may affect the Company’s future results of operations and financial
results, please refer to the Company’s filings with the Securities
and Exchange Commission, including, but not limited to, the risk
factors in the Company’s most recent Annual Report on Form 10-K.
These filings are available in the Investor Relations section of
our website under the “SEC Filings” tab.
All forward-looking statements are necessarily only estimates of
future results, and there can be no assurance that actual results
will not differ materially from expectations, and, therefore, you
are cautioned not to place undue reliance on such statements.
Further, any forward-looking statement speaks only as of the date
on which it is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events.
The information provided herein includes certain non-GAAP
financial measures. These non-GAAP financial measures are intended
to supplement the GAAP financial information by providing
additional insight regarding results of operations of the Company.
Certain items are excluded from these non-GAAP financial measures
to provide additional comparability measures from period to period.
These non-GAAP financial measures will not be defined in the same
manner by all companies and may not be comparable to other
companies. These non-GAAP financial measures are reconciled in the
accompanying tables to the most directly comparable measures as
reported in accordance with GAAP, and should be viewed in addition
to, and not in lieu of, such comparable financial measures.
-- Tables to Follow --
ModusLink Global Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (in thousands) (unaudited)
January 31, July 31, 2017
2016 Assets: Cash and cash equivalents $ 114,334 $ 130,790 Trading
securities 11,029 16,768 Accounts receivable, net 104,214 111,336
Inventories 36,927 40,270 Funds held for clients 11,487 12,549
Prepaid and other current assets 7,701 8,178 Total
current assets 285,692 319,891 Property and
equipment, net 20,983 22,271 Other assets 5,523 5,770
Total assets $ 312,198 $ 347,932 Liabilities: Accounts
payable $ 91,145 $ 114,432 Accrued restructuring 1,151 2,936
Accrued expenses 39,617 37,740 Funds held for clients 11,487 12,549
Other current liabilities 28,487 27,109 Total current
liabilities 171,887 194,766 Long-term portion of
accrued restructuring - 93 Notes payable 57,603 57,169 Other
long-term liabilities 9,212 9,964 Total liabilities
238,702 261,992 Stockholders' equity: 73,496
85,940 Total liabilities and stockholders' equity $
312,198 $ 347,932 ModusLink Global Solutions, Inc. and
Subsidiaries Condensed Consolidated Statements of Operations (in
thousands, except per share data) (unaudited)
Three Months Ended January 31, Six Months
Ended January 31, 2017 2016 Fav (Unfav) 2017 2016 Fav (Unfav) Net
revenue $ 117,568 $ 119,966 (2.0 %) $ 238,895 $ 261,055 (8.5 %)
Cost of revenue 106,370 116,311 8.5 %
218,364 244,948 10.9 % Gross profit
11,198 3,655 206.4 % 20,531
16,107 27.5 % 9.5 % 3.0 % 6.5 % 8.6 % 6.2 %
2.4 % Operating expenses: Selling, general and administrative
11,926 14,773 19.3 % 25,527 27,787 8.1 % Impairment of long-lived
assets - 305 - - 305 - Restructuring, net 776
240 (223.3 %) 2,150 1,247 (72.4
%) Total operating expenses 12,702 15,318
17.1 % 27,677 29,339 5.7 %
Operating loss (1,504 ) (11,663 ) 87.1 % (7,146 ) (13,232 ) 46.0 %
Other expense, net (1,075 ) (2,338 ) 54.0 %
(3,427 ) (14,692 ) 76.7 % Loss before taxes (2,579 ) (14,001
) 81.6 % (10,573 ) (27,924 ) 62.1 % Income tax expense 723 206
(251.0 %) 1,772 1,056 (67.8 %) Gains on investments in affiliates,
net of tax (396 ) (259 ) 52.9 % (896 )
(259 ) 245.9 % Net loss $ (2,906 ) $ (13,948 ) 79.2 % $ (11,449 ) $
(28,721 ) 60.1 % Basic and diluted net loss per
share: $ (0.05 ) $ (0.27 ) $ (0.21 ) $ (0.55 ) Weighted
average common shares used in basic and diluted earnings per share
55,083 51,879 55,031 52,039 ModusLink Global Solutions, Inc.
and Subsidiaries Condensed Consolidated Statements of Operations
Information by Operating Segment (in thousands) (unaudited)
Three Months Ended January 31, Six Months
Ended January 31, 2017 2016 2017 2016
Net
revenue:
Americas $ 27,183 $ 28,208 $ 53,061 $ 61,419 Asia 38,861
44,476 81,734 98,407 Europe 44,910 38,656 90,091 83,399 e-Business
6,614 8,626 14,009
17,830 Total net revenue $ 117,568 $ 119,966 $
238,895 $ 261,055
Operating income
(loss):
Americas $ (1,721 ) $ (4,911 ) $ (5,577 ) $ (7,997 ) Asia
2,311 (325 ) 4,088 3,046 Europe 41 (4,239 ) (2,550 ) (4,032 )
e-Business (888 ) (397 ) (544 ) (901 )
Total segment operating loss (257 ) (9,872 ) (4,583 ) (9,884 )
Corporate-level activity (1,247 ) (1,791 )
(2,563 ) (3,348 ) Total operating loss $ (1,504 ) $ (11,663
) $ (7,146 ) $ (13,232 )
ModusLink Global Solutions, Inc. and
Subsidiaries
Reconciliation of Selected Non-GAAP
Measures to GAAP Measures
(in thousands)
(unaudited)
Net loss to Adjusted EBITDA1
Three Months Ended January 31,
Six Months Ended January 31,
2017
2016
2017
2016
Net loss
$
(2,906
)
$
(13,948
)
$
(11,449
)
$
(28,721
) Interest income (15 ) (114 ) (180 ) (202 ) Interest
expense 2,109 2,777 4,138 5,506 Income tax expense 723 206 1,772
1,056 Depreciation 2,068 1,919 4,090 3,874
EBITDA
1,979
(9,160
)
(1,629
)
(18,487
)
SEC inquiry and financial restatement costs 10 345 12 167
Strategic consulting and other related professional fees 3 277 7
284 Executive severance and employee retention - - 300 -
Restructuring 776 240 2,150 1,247 Share-based compensation 189 502
381 958 Impairment of goodwill and long-lived assets - 305 - 305
Unrealized foreign exchange (gains) losses, net 1,815 1,087 1,582
1,816 Other non-operating (gains) losses, net (990 ) (384 ) (105 )
8,778 (Gains) on investments in affiliates and impairments
(396 ) (259 ) (896 ) (217 )
Adjusted EBITDA
$
3,386
$
(7,047
)
$
1,802
$
(5,149
)
1 The Company defines Adjusted EBITDA as net
income (loss) excluding net charges related to interest income,
interest expense, income tax expense, depreciation, amortization of
intangible assets, SEC inquiry and financial restatement costs,
strategic consulting and other related professional fees, executive
severance and employee retention, restructuring, share-based
compensation, impairment of goodwill and long-lived assets,
unrealized foreign exchange gains and losses, net, other
non-operating gains and losses, net, and gains and losses on
investments in affiliates and impairments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170306006366/en/
Investor Relations Contact:GW
Communications for ModusLinkGlenn Wiener,
212-786-6011gwiener@GWCco.com