Volt Information Sciences, Inc. Reports First Quarter Fiscal 2020 Financial Results

 

Adjusted Revenue In-Line with Expectations

 

New York, NY, March 12, 2020 -- (BUSINESS WIRE) -- Volt Information Sciences, Inc. (“Volt” or the “Company”) (NYSE-AMERICAN: VOLT) a global provider of staffing services, today announced financial results for the first quarter ended February 2, 2020.

First Quarter Highlighted Results

·Revenue was $217.8 million, compared to $253.4 million in the prior-year quarter; Adjusted Revenue* decreased 10.4%.
·Gross margin was 14.4%, versus 14.9% for the comparable quarter in 2019.
·GAAP operating loss increased by $7.2 million from the prior-year quarter to a loss of $9.3 million; Adjusted Operating Loss* increased by $6.5 million year over year.
·Adjusted EBITDA* was a loss of $5.6 million compared to a loss of $1.1 million in the prior-year quarter.

*Adjusted Revenue, Adjusted Operating Loss and Adjusted EBITDA are Non-GAAP measures described and defined below.

“Our first quarter Adjusted Revenue coming in at the top-end of our guidance reflects the continued advancement of the strategic initiatives implemented in fiscal 2019,” said Linda Perneau, President and Chief Executive Officer. “We expect this progress to continue into the second quarter, which should result in a sequential improvement in Adjusted Revenue and Adjusted EBITDA, and we believe this favorable quarterly trend will continue throughout fiscal 2020. Additionally, we expect further cost savings in our SG&A expense, primarily related to the transition of certain back office functions to our Bangalore, India office.”

 

First Quarter Results

North American Staffing revenue for the quarter was $182.4 million, as compared to $211.8 million for the first quarter of fiscal 2019. Adjusted Revenue, which is a Non-GAAP measure, for this segment decreased approximately 12.7 percent year over year. The decrease is primarily attributable to continued workforce adjustments at certain larger clients specifically related to their businesses, and a slower than anticipated post-holiday ramp, partially offset by business wins with new clients and expansion of service with existing clients.

International Staffing revenue was $26.2 million, relatively unchanged compared to the first quarter of 2019. Adjusted Revenue for this segment increased 0.2 percent year over year. The increase is primarily due to an increase in the Belgium and Singapore operations, offset by lower revenues from the UK operations.

   

 

North American MSP revenue was $9.4 million, as compared to $8.2 million for the first quarter of 2019. Adjusted Revenue for this segment increased approximately 13.1 percent over the prior year. The increase is primarily attributable to expansion within existing clients.

Gross margin for the quarter was 14.4 percent of revenue, compared to 14.9 percent of revenue in the first quarter of fiscal 2019. The change is attributable to a smaller credit related to our workers’ compensation versus the prior year, an increase in other state-mandated benefit costs, and a mix shift within our North American MSP segment.

SG&A expense for the first quarter was $39.5 million, a $0.3 million reduction from the prior-year quarter. The decrease is primarily due to cost reductions in all areas of our business, including lower professional fees, labor costs resulting from lower headcount, and facility related costs, which were partially offset by increased depreciation expense, and favorable adjustments for medical claims and equity compensation from the first quarter of 2019 that did not recur this year, as well as an increase in expenses due to the elimination of a deferred gain offset under the new lease accounting rules effective this quarter.

Adjusted EBITDA, which is a Non-GAAP measure, for the first quarter of fiscal 2020 was a loss of $5.6 million, as compared to a loss of $1.1 million in the prior-year quarter.

“We are actively monitoring the spread of coronavirus internationally and in the U.S. Though we are not experiencing any notable business impact at this time, we are updating our preparedness plans to minimize risk should an outbreak occur at any of our offices, client sites, or in any of the communities in which we operate. The health and safety of our clients, field employees and Volt colleagues is always our top priority,” said Ms. Perneau.

 

Business Outlook

The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Forward-Looking Statements” below.

For the second quarter of fiscal 2020, we have seen a favorable trend in regard to Adjusted Revenue through the first six weeks of the quarter. Although, we have not experienced any notable impact that we are aware of today, due to the vast uncertainty around COVID-19, it would not be prudent of us at this time to assume the full impact we may incur for the remainder of the quarter. This is a rapidly changing landscape that we are closely monitoring in real time.

 

Earnings Conference Call and Webcast

Volt Information Sciences, Inc. will conduct a conference call on Thursday, March 12, 2020, at 5:00 PM ET, to review the financial results for the first quarter ended February 2, 2020. Investors interested in participating on the live call can dial 1-877-407-9039 within the U.S. or 1-201-689-8470 from abroad, and reference conference ID 13698566. The conference call, which may include forward-looking statements, is also being webcast and will be available via the investor relations section of the Company’s website at www.volt.com. A replay of the webcast will be archived on Volt’s investor relations website for 90 days.

 

   

 

Forward-Looking Statements

This press release contains forward-looking statements, including the Company’s Adjusted Revenue outlook for the second quarter of fiscal 2020 and future SG&A expense reductions, that are subject to a number of known and unknown risks. Such risks include, among others, general economic, competitive and other business conditions (including the potential impact of the strain of coronavirus known as COVID-19 on our operations as well as the operations of our customers), the degree and timing of customer utilization and renewal rate for 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 the “Risk Factors” and other sections of the Company reports filed with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties that may apply to our business and the ownership of our securities. Our forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required by law to do so.

Note Regarding the Use of Non-GAAP Financial Measures

The Company has provided certain Non-GAAP financial information, including Adjusted Revenue, Adjusted Operating Income (Loss) and Adjusted EBITDA, which include adjustments to our GAAP financial results. 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, including on a constant currency basis and accounting for the migration of certain clients from a traditional staffing model to a managed service model, while eliminating the impact of businesses sold or exited, the extra operating week in the fourth quarter of fiscal 2019 and 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, special items or the impact of businesses sold or exited 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 which the Company does not consider indicative of the current and future period performance and are more fully disclosed in the tables.

Adjusted Revenue, as previously defined, is revenue excluding businesses exited, the effect of foreign currency translation and the extra operating week in the fourth quarter of fiscal 2019. The Company has also migrated certain clients from a traditional staffing model to a managed service model, resulting in the Company now managing a greater percentage of such clients’ business under its North American MSP.  This shift provides increased opportunity for the Company with the relevant clients. However, due to the structure of MSP arrangements, revenue is recognized on a net basis, thereby reducing revenues on a comparative period basis. Beginning in the first quarter of 2020, the Company will include such delivery model shifts within the Adjusted Revenue measurement, as it provides a more comparable basis for evaluating performance results from period to period and reflects the method used by management to evaluate performance. The decrease in Adjusted Revenue from the prior-year quarter, as previously defined, was 11.4 percent. A reconciliation is shown in the tables at the end of this press release. 

   

 

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.

Adjusted Operating Income (Loss) is defined as operating income (loss) excluding businesses exited and the extra operating week in the fourth quarter of fiscal 2019. The Company believes the presentation of Adjusted Operating Income (Loss) is relevant and useful for investors because it provides a more comparable basis to evaluate performance results and analyze trends from period to period in a manner similar to the method used by management.

The Company’s computation of Adjusted Revenue, Adjusted EBITDA and Adjusted Operating Income (Loss) 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.

   

 

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). Our staffing services consist of workforce solutions that include providing contingent workers, personnel recruitment services, and managed staffing services programs supporting primarily administrative, technical, information technology, light-industrial and engineering positions. Our managed staffing programs involve managing the procurement and on-boarding of contingent workers from multiple providers. 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

 

Investor Relations Contacts:
Volt Information Sciences, Inc.
voltinvest@volt.com

Joe Noyons
Three Part Advisors
jnoyons@threepa.com

817-778-8424

 

Financial Tables Follow

 

   

 

Results of Operations         
(in thousands, except per share data)   
   Three Months Ended
   February 2, 2020  November 3, 2019  January 27, 2019
          
Net revenue  $217,766   $258,408   $253,436 
Cost of services   186,339    215,449    215,737 
Gross margin   31,427    42,959    37,699 
                
Selling, administrative and other operating costs   39,497    39,908    39,810 
Restructuring and severance costs   1,246    1,856    59 
Impairment charges   11    262    —   
Operating income/(loss)   (9,327)   933    (2,170)
                
Interest income (expense), net   (700)   (723)   (746)
Foreign exchange gain (loss), net   (328)   (360)   213 
Other income (expense), net   (258)   (292)   (239)
Loss before income taxes   (10,613)   (442)   (2,942)
Income tax provision   195    307    273 
Net loss  $(10,808)  $(749)  $(3,215)
                
Per share data:               
Basic:               
Net loss  $(0.50)  $(0.04)  $(0.15)
Weighted average number of shares   21,416    21,157    21,080 
                
Diluted:               
Net loss  $(0.50)  $(0.04)  $(0.15)
Weighted average number of shares   21,416    21,157    21,080 
                
Segment data:               
                
Net revenue:               
North American Staffing  $182,395   $216,587   $211,848 
International Staffing   26,223    30,574    26,266 
North American MSP   9,369    11,659    8,217 
Corporate and Other   203    187    7,846 
Eliminations   (424)   (599)   (741)
Net revenue  $217,766   $258,408   $253,436 
                
Operating income (loss):               
North American Staffing  $99   $7,167   $3,887 
International Staffing   374    1,619    304 
North American MSP   754    1,838    965 
Corporate and Other   (10,554)   (9,691)   (7,326)
Operating income (loss)  $(9,327)  $933   $(2,170)
                
Work days   59    69    59 

 

 

   

 

Condensed Consolidated Statements of Cash Flows      
(in thousands)      
   Three Months ended
   February 2, 2020  January 27, 2019
       
Cash, cash equivalents and restricted cash beginning of the period  $38,444   $36,544 
           
Cash used in all other operating activities   (6,081)   (2,188)
Changes in operating assets and liabilities   6,114    4,148 
Net cash provided by operating activities   33    1,960 
           
Purchases of property, equipment, and software   (1,370)   (1,698)
Net cash provided by (used in) all other investing activities   336    (69)
Net cash used in investing activities   (1,034)   (1,767)
           
Net draw-down of borrowings   —      5,000 
Debt issuance costs   (230)   (140)
Net cash used in all other financing activities   (6)   —   
Net cash provided by (used in) financing activities   (236)   4,860 
           
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (565)   (429)
           
Net increase (decrease) in cash, cash equivalents and restricted cash   (1,802)   4,624 
           
Cash, cash equivalents and restricted cash end of the period  $36,642   $41,168 
           
Cash paid during the period:          
Interest  $730   $801 
Income taxes  $4   $146 
           
Reconciliation of cash, cash equivalents and restricted cash end of the period:          
Current Assets:          
Cash and cash equivalents  $30,876   $32,925 
Restricted cash included in Restricted cash and short term investments   5,766    8,243 
Cash, cash equivalents and restricted cash, at end of period  $36,642   $41,168 

 

   

 

Condensed Consolidated Balance Sheets      
(in thousands, except share amounts)      
   February 2, 2020  November 3, 2019
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents  $30,876   $28,672 
Restricted cash and short-term investments   8,484    12,794 
Trade accounts receivable, net of allowances of $95 and $117, respectively   125,113    135,950 
Other current assets   7,595    7,252 
TOTAL CURRENT ASSETS   172,068    184,668 
Property, equipment and software, net   25,274    25,890 
Right of use assets - operating leases   45,158    —   
Other assets, excluding current portion   6,781    7,446 
TOTAL ASSETS  $249,281   $218,004 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES:          
Accrued compensation  $20,713   $21,507 
Accounts payable   29,939    36,341 
Accrued taxes other than income taxes   13,062    11,244 
Accrued insurance and other   22,841    24,654 
Operating lease liabilities   8,123    —   
Income taxes payable   1,741    1,570 
TOTAL CURRENT LIABILITIES   96,419    95,316 
Accrued insurance and other, excluding current portion   8,579    12,029 
Operating lease liabilities, excluding current portion   41,693    —   
Deferred gain on sale of real estate, excluding current portion   —      20,270 
Income taxes payable, excluding current portion   289    289 
Deferred income taxes   5    17 
Long-term debt   53,831    53,894 
TOTAL LIABILITIES   200,816    181,815 
           
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 - 21,408,659 and 21,367,821 shares, respectively   2,374    2,374 
Paid-in capital   78,085    77,688 
(Accumulated deficit) retained earnings   (248)   (10,917)
Accumulated other comprehensive loss   (6,437)   (6,801)
Treasury stock, at cost; 2,329,344 and 2,370,182 shares, respectively   (25,309)   (26,155)
TOTAL STOCKHOLDERS' EQUITY   48,465    36,189 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $249,281   $218,004 

 

   

 

GAAP to Non-GAAP Reconciliations  
(in thousands)  
           
   Three Months Ended  
   February 2, 2020    January 27, 2019  
Reconciliation of GAAP net loss to Non-GAAP net loss:          
GAAP net loss  $(10,808)    $(3,215)  
  Selling, administrative and other operating costs         (486) (b)
  Restructuring and severance costs   1,246  (a)   59   
  Impairment Costs   11         
Non-GAAP net loss  $(9,551)    $(3,642)  
               
    Three Months Ended          
    February 2, 2020      January 27, 2019   
Reconciliation of GAAP net loss to Adjusted EBITDA:              
GAAP net loss  $(10,808)    $(3,215)  
  Selling, administrative and other operating costs         (486) (b)
  Restructuring and severance costs   1,246  (a)   59   
  Impairment Costs   11         
  Depreciation and amortization   1,973      1,603   
  Share-based compensation expense   511      (113)  
  Total other (income) expense, net   1,286      772   
  Provision (benefit) for income taxes   195      273   
Adjusted EBITDA  $(5,586)    $(1,107)  

Special item adjustments consist of the following:

(a)Primarily relates to the strategic initiative costs to offshore a significant number of identified roles to our staffing operations in Bangalore, India.
(b)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.

   

 

GAAP to Non-GAAP Reconciliations
(in thousands)
                
   Three Months Ended February 2, 2020  Three Months Ended January 27, 2019
   As Reported  As Reported  FX impact  Business Exited  Adjusted
Revenue               
North American Staffing  $182,395   $211,848   $—     $(350)  $211,498 
International Staffing   26,223    26,266    (106)   —      26,160 
North American MSP   9,369    8,217    —      —      8,217 
Corporate and Other   203    7,846    —      (7,674)   172 
Eliminations   (424)   (741)   —      350    (391)
Total Revenue  $217,766   $253,436   $(106)  $(7,674)  $245,656 
% change                       -11.4%

   Three Months Ended February 2, 2020  Three Months Ended January 27, 2019
Revenue  As Reported  Adjusted  MSP Delivery Model Shift  Adjusted after
MSP Delivery Model Shift
North American Staffing  $182,395   $211,498   $(2,563)  $208,935 
International Staffing   26,223    26,160    —      26,160 
North American MSP   9,369    8,217    66    8,283 
Corporate and Other   203    172    —      172 
Eliminations   (424)   (391)   —      (391)
Total Revenue  $217,766   $245,656   $(2,497)  $243,159 
% change                  -10.4%

 

GAAP to Non-GAAP Reconciliations
(in thousands)
                   
   Three Months Ended February 2, 2020  Three Months Ended January 27, 2019
   As Reported  Business Exited  Adjusted  As Reported  Business Exited  Adjusted
Operating Income (Loss)                              
North American Staffing  $99   $—     $99   $3,887   $—     $3,887 
International Staffing   374    —      374    304    3    307 
North American MSP   754    —      754    965    —      965 
Corporate and Other   (10,554)   32    (10,522)   (7,326)   (666)   (7,992)
Total Operating Income (Loss)  $(9,327)  $32   $(9,295)  $(2,170)  $(663)  $(2,833)

 

 

GAAP to Non-GAAP Reconciliations
(in thousands)
                   
   Three Months Ended February 2, 2020  Three Months Ended January 27, 2019
   As Reported  Business Exited  Adjusted  As Reported  Business Exited  Adjusted
Operating Loss                              
Gross Margin  $31,427   $—     $31,427   $37,699   $(1,005)  $36,694 
Selling, administrative and other operating costs   39,497    —      39,497    39,810    (333)   39,477 
Restructuring and severance costs   1,246    (32)   1,214    59    (9)   50 
Impairment charges   11    —      11    —      —      —   
Total Operating Loss  $(9,327)  $32   $(9,295)  $(2,170)  $(663)  $(2,833)