- Net revenue of $97.9 million increased
1.5% versus Q3 of fiscal year 2016
- Gross margin of 8.7% improved by 650
basis points versus Q3 of fiscal year 2016
- Operating expenses of $13.8 million
declined by 6.0% versus Q3 of fiscal year 2016
- Operating loss of $5.2 million, a $7.3
million improvement versus Q3 of fiscal year 2016
- Net loss of $5.1 million, a $7.8
million improvement versus Q3 of fiscal year 2016
- Adjusted EBITDA of $(3.6) million, an
improvement of $6.9 million versus Q3 of fiscal year 2016
ModusLink Global Solutions™, Inc. (the “Company” or “ModusLink”)
(NASDAQ: MLNK), announced today its financial results for its third
quarter of fiscal year 2017 ended April 30, 2017. Results for the
three and nine months ended April 30, 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 third 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 third
quarter and first nine 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, “We continue to make significant progress in our
transformation. This past quarter, we grew the top-line, generated
a 650 basis-point gross margin improvement and continued to drive
expenses down, while investing throughout our global footprint. Our
focus remains on profitable growth and partnering with our clients
to improve their overall value proposition.”
Mr. Henderson added, “Through the first nine months of fiscal
year 2017, we have reduced operating losses by over $13 million,
net losses by over $25 million and EBITDA losses by over $24
million. While we are pleased with our results to date, our goal
remains to achieve profitability and be in a position where we can
sustain it. The key to this will be revenue stabilization and
future growth. We must continue to focus on winning profitable
programs, where we can leverage our global footprint, supply chain
efficiencies and our innovative solutions. To that end, we have
expanded our products and services and improved our operating
platform. With our successes to date, we are on track to realize
the $32 million in annualized EBITDA savings we committed to when
our transformation began.”
Third Quarter and Year-to-Date Financial
Results Summary
Net RevenueThe Company reported net revenue of $97.9
million for the quarter ended April 30, 2017, as compared to $96.5
million for the same period in the prior year, an increase of $1.5
million or 1.5%. Driving the increase were higher revenues in Asia
and Europe, up 11.6% and 3.3%, respectively, partially offset by
declines in the Americas and in the Company’s e-Business
segment.
The Company reported net revenue of $336.8 million for the nine
months ended April 30, 2017, as compared to $357.5 million for the
same period the prior year, a decline of $20.7 million or 5.8%. Net
revenue in Europe increased $7.8 million or 6.7%, and this was
offset by declines in the Company’s other reportable segments,
primarily as a result of lower revenues from two clients in the
consumer electronics industry.
Gross MarginGross margin for the quarter ended April 30,
2017 was 8.7%, as compared to 2.3% for the same period in the prior
year, an improvement of 650 basis points. The improvement in gross
margin was driven primarily by a more efficient use of temporary
labor, and an overall focus on improving supply chain operations
and pricing discipline. Furthermore, gross margins improved in each
of the Company’s reportable operating segments, demonstrating the
impact of the turnaround initiatives implemented throughout the
course of the year. When comparing the quarters ended April 30,
2017 and April 30, 2016, gross margin within the Americas increased
from -3.5% to 1.1%; gross margin within Asia increased from 9.6% to
16.3%; gross margin within Europe increased from 0.7% to 5.0%; and
gross margin within the e-Business segment increased from -6.3% to
9.0%.
Gross margin for the nine months ended April 30, 2017 was 8.6%,
as compared to 5.1% for the same period in the prior year, an
improvement of 350 basis points. The increase in gross margin was
driven primarily by a more efficient use of temporary labor, an
improved client mix and various process improvements, partially
offset by lower revenues. When comparing the nine months ended
April 30, 2017 and April 30, 2016, gross margin within the Americas
increased from -1.9% to 0.4%; gross margin within Asia increased
from 12.6% to 16.9%; gross margin within Europe increased from 2.8%
to 6.0%; and gross margin within the e-Business segment increased
from 0.5% to 6.3%.
Operating ExpensesTotal operating expenses for the
quarter ended April 30, 2017 were $13.8 million, as compared to
$14.7 million in the same period in the prior year, a reduction of
$0.9 million or 6.0%. Selling, general and administrative
(“SG&A”) expenses for the quarter ended April 30, 2017 were
$14.0 million, a reduction of $0.5 million or 3.1%, as compared to
the same period in the prior year. Driving the reduction in
SG&A were lower employee-related costs associated with the
Company’s turnaround initiatives, as well as lower professional
fees. Additionally, corporate-level SG&A expenses declined by
$0.6 million or 34.6%.
Total operating expenses for the nine months ended April 30,
2017 were $41.5 million, as compared to $44.0 million in the same
period in the prior year, a reduction of $2.5 million or 5.8%.
SG&A expenses for the first nine months of fiscal year 2017
were $39.6 million, a reduction of $2.7 million or 6.4%, as
compared to the same period in the prior year. The year-over-year
improvement was driven primarily by lower employee-related costs
and lower professional fees, partially offset by a gain of $1.2
million included in the comparable period in the prior year related
to the sale of a building in Europe.
For the quarter ended April 30, 2017, net restructuring expenses
were approximately $(0.2) million, as compared to $0.2 million in
the same period in the prior year. For the nine months ended April
30, 2017, net restructuring expenses were approximately $1.9
million, as compared to $1.4 million for the same period in the
prior year.
Operating Income (Loss)The Company reported an operating
loss of $5.2 million for the quarter ended April 30, 2017, as
compared to an operating loss of $12.5 million for the same period
in the prior year, an improvement of $7.3 million. Operating loss
for the nine months ended April 30, 2017 was $12.4 million, as
compared to an operating loss of $25.7 million for the nine months
ended April 30, 2016, an improvement of $13.3 million. The
year-over-year improvement for both the three- and nine-month
periods was primarily attributable to higher gross margins and
lower operating expenses, which were direct results of the
Company’s turnaround initiatives.
Net Income (Loss)The Company reported a net loss of $5.1
million or a net loss per basic and diluted share of $0.09 for the
quarter ended April 30, 2017. This compares to a net loss of $12.8
million or a loss per basic and diluted share of $0.25 for the same
period in the prior year. For the nine months ended April 30, 2017,
the Company reported a net loss of $16.5 million or a net loss per
basic and diluted share of $0.30. This compares to a net loss of
$41.6 million or a loss per basic and diluted share of $0.80 for
the same period in the prior year.
EBITDA and Adjusted EBITDAFor the three months ended
April 30, 2017, the Company reported negative Earnings Before
Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $(0.4)
million, as compared to negative EBITDA of $(8.0) million for the
same period in the prior year, a year-over-year improvement of $7.6
million. For the nine months ended April 30, 2017, the Company
reported negative EBITDA of $(2.1) million, as compared to negative
EBITDA of $(26.5) million for the same period in the prior year, an
improvement of $24.4 million.
For the three months ended April 30, 2017, the Company reported
negative Adjusted EBITDA of $(3.6) million, as compared to negative
Adjusted EBITDA of $(10.5) million in the same period in the prior
year, an improvement of $6.9 million. For the nine months ended
April 30, 2017, the Company reported negative Adjusted EBITDA of
$(1.8) million, as compared to a negative Adjusted EBITDA of
$(15.7) million in the same period the prior year, an improvement
of $13.9 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 assist 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) April 30, July 31, 2017 2016 Assets: Cash and
cash equivalents $ 111,945 $ 130,790 Trading securities 11,373
16,768 Accounts receivable, net 93,402 111,336 Inventories 34,702
40,270 Funds held for clients 12,071 12,549 Prepaid and other
current assets 8,174 8,178 Total current assets
271,667 319,891 Property and equipment, net 19,867
22,271 Other assets 4,937 5,770 Total assets $
296,471 $ 347,932 Liabilities: Accounts payable $ 81,145 $
114,432 Accrued restructuring 313 2,936 Accrued expenses 40,017
37,740 Funds held for clients 12,071 12,549 Other current
liabilities 26,087 27,109 Total current liabilities
159,633 194,766 Long-term portion of accrued
restructuring - 93 Notes payable 58,663 57,169 Other long-term
liabilities 9,246 9,964 Total liabilities
227,542 261,992 Stockholders' equity: 68,929 85,940
Total liabilities and stockholders' equity $ 296,471
$ 347,932 ModusLink Global Solutions, Inc. and
Subsidiaries Condensed Consolidated Statements of Operations (in
thousands, except per share data) (unaudited)
Three Months Ended April 30, Nine Months Ended April 30, 2017 2016
Fav (Unfav) 2017 2016 Fav (Unfav) Net revenue $ 97,948 $ 96,460 1.5
% $ 336,843 $ 357,515 (5.8 %) Cost of revenue 89,406
94,286 5.2 % 307,770 339,234
9.3 % Gross profit 8,542 2,174
292.9 % 29,073 18,281 59.0 % 8.7 % 2.3
% 6.5 % 8.6 % 5.1 % 3.5 % Operating expenses: Selling, general and
administrative 14,034 14,489 3.1 % 39,561 42,276 6.4 % Impairment
of long-lived assets - - - - 305 - Restructuring, net (249 )
182 236.8 % 1,901 1,429
(33.0 %) Total operating expenses 13,785
14,671 6.0 % 41,462 44,010 5.8 %
Operating loss (5,243 ) (12,497 ) 58.0 % (12,389 ) (25,729 ) 51.8 %
Other income (expense), net 763 (260 ) 393.5 %
(2,664 ) (14,952 ) 82.2 % Loss before taxes (4,480 )
(12,757 ) 64.9 % (15,053 ) (40,681 ) 63.0 % Income tax expense 819
408 (100.7 %) 2,591 1,464 (77.0 %) Gains on investments in
affiliates, net of tax (232 ) (316 ) (26.6 %)
(1,128 ) (575 ) 96.2 % Net loss $ (5,067 ) $ (12,849 ) 60.6
% $ (16,516 ) $ (41,570 ) 60.3 % Basic and diluted
net loss per share: $ (0.09 ) $ (0.25 ) $ (0.30 ) $ (0.80 )
Weighted average common shares used in basic and diluted earnings
per share 55,257 52,200 55,099 51,867 ModusLink
Global Solutions, Inc. and Subsidiaries Condensed Consolidated
Statements of Operations Information by Operating Segment (in
thousands) (unaudited)
Three Months Ended April 30, Nine Months Ended
April 30, 2017 2016 2017 2016
Net
revenue:
Americas $ 20,179 $ 22,707 $ 73,240 $ 84,126 Asia 37,056
33,217 118,790 131,624 Europe 34,272 33,186 124,363 116,585
e-Business 6,441 7,350 20,450
25,180 Total net revenue $ 97,948 $
96,460 $ 336,843 $ 357,515
Operating income
(loss):
Americas $ (2,363 ) $ (3,601 ) $ (7,939 ) $ (11,598 ) Asia
832 (2,015 ) 4,921 1,031 Europe (2,334 ) (3,826 ) (4,885 ) (7,858 )
e-Business (197 ) (1,248 ) (742 )
(2,149 ) Total segment operating loss (4,062 ) (10,690 ) (8,645 )
(20,574 ) Corporate-level activity (1,181 ) (1,807 )
(3,744 ) (5,155 ) Total operating loss $ (5,243 ) $
(12,497 ) $ (12,389 ) $ (25,729 )
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 April 30, Nine Months Ended April
30, 2017 2016 2017 2016 Net loss $ (5,067 ) $ (12,849
) $ (16,516 ) $ (41,570 ) Interest income (96 ) (334 ) (276
) (536 ) Interest expense 2,041 2,833 6,179 8,339 Income tax
expense 819 408 2,591 1,464 Depreciation 1,877 1,946 5,967 5,820
EBITDA (426 ) (7,996 ) (2,055 ) (26,483
) SEC inquiry and financial restatement costs - 125 12 292
Strategic consulting and other related professional fees 20 150 27
434 Executive severance and employee retention - - 300 -
Restructuring (249 ) 182 1,901 1,429 Share-based compensation 145
(32 ) 526 926 Impairment of long-lived assets - - - 305 Unrealized
foreign exchange (gains) losses, net (350 ) (544 ) 1,232 1,272
Other non-operating (gains) losses, net (2,502 ) (2,083 ) (2,607 )
6,695 (Gains) on investments in affiliates and impairments
(232 ) (316 ) (1,128 ) (533 ) Adjusted EBITDA
$ (3,594 ) $ (10,514 ) $ (1,792 ) $ (15,663 )
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, SEC penalties
on resolution, 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.
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Investor Relations:GW
Communications for ModusLinkGlenn Wiener,
212-786-6011gwiener@GWCco.com