Volt Information Sciences, Inc. Reports Third Quarter Fiscal 2020 Financial Results
ORANGE, Calif.–(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 third fiscal quarter ended August 2, 2020.
Third Quarter Highlighted Results
- Revenue was $185.9 million, compared to $233.2 million in the prior-year quarter; Adjusted Revenue* decreased 18.4%.
- Gross margin was 16.1%, an 80-basis point improvement compared to the prior-year quarter.
- GAAP operating loss was $4.2 million, compared to $4.8 million in the prior-year quarter; excluding restructuring and impairment charges, operating loss would have been $1.3 million compared to $2.7 million in the prior-year quarter.
- Adjusted EBITDA* was $1.0 million, a $2.2 million improvement compared to the prior-year quarter.
*Adjusted Revenue, Adjusted Operating Loss and Adjusted EBITDA are Non-GAAP measures described and defined below.
“I remain incredibly proud of our Volt colleagues, all of whom continue to confidently navigate the prolonged economic and health uncertainty,” said Linda Perneau, President and Chief Executive Officer. “Their efforts allowed us to safely return thousands of employees back to work, enabled multiple clients to resume full operations, and secured new business wins, partially offsetting pandemic related declines. Throughout the third quarter we posted month-over-month improvements in Adjusted Revenue and gross margin. We reduced SG&A expenses and posted positive Adjusted EBITDA of $1.0 million for the quarter. We believe these trends will continue in the fourth quarter as we remain focused on our growth and profitability initiatives.”
Third Quarter Results
North American Staffing revenue for the quarter was $154.7 million, compared to $193.6 million in the third quarter of fiscal 2019. Adjusted Revenue, which is a Non-GAAP measure, for this segment decreased approximately 18.6 percent year over year. The decrease is primarily attributable to client facility closures and reduced demand associated with COVID-19, partially offset by business wins with new and existing clients.
International Staffing revenue was $21.7 million, compared to $28.7 million in the third quarter of fiscal 2019. Adjusted Revenue, for this segment decreased 23.9 percent year over year. The decrease is primarily due to reduced work orders in the U.K.
North American MSP revenue was $9.4 million, compared to $9.6 million in the third quarter of fiscal 2019. The decrease is primarily attributable to a decline in managed service programs, partially offset by increased payroll revenue.
Gross margin for the quarter was 16.1 percent of revenue, compared to 15.3 percent of revenue in the third quarter of fiscal 2019. The change is attributable to a credit related to our workers’ compensation versus the prior year, and a decrease in payroll tax rates.
SG&A expense for the third quarter was $31.2 million, a $7.2 million reduction from the prior-year quarter. The decrease is primarily due to substantial cost reductions taken throughout the year and the impact of working remotely as well as COVID-19 restrictions on travel.
Volt incurred impairment and restructuring charges of $2.9 million in the third quarter as a part of its ongoing real estate rationalization and cost savings initiatives. These charges were primarily the result of consolidating and exiting certain leased office locations throughout North America based on where Volt can be fully operational and successfully support our clients and business operations remotely.
Adjusted EBITDA, which is a Non-GAAP measure, for the third quarter of fiscal 2020 was $1.0 million, as compared to a loss of $1.2 million in the prior-year quarter.
Business Outlook
Due to the continued uncertainty surrounding the timing of reopening specific geographies, the Company is not providing Adjusted Revenue guidance for the fourth quarter of fiscal 2020.
Earnings Conference Call and Webcast
Volt Information Sciences, Inc. will conduct a conference call on Thursday, September 10, 2020, at 5:00 PM ET, to review the financial results for the third fiscal quarter ended August 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 13709427. 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 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, 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 is defined as 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 includes 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. 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 |
|
Nine Months Ended |
||||||||||||||||||
|
August 2, 2020 |
|
May 3, 2020 |
|
July 28, 2019 |
|
August 2, 2020 |
|
July 28, 2019 |
||||||||||||
| Net revenue |
$ |
185,941 |
|
$ |
207,275 |
|
$ |
233,176 |
|
$ |
610,982 |
|
$ |
738,682 |
|
|||||
| Cost of services |
|
155,983 |
|
|
175,038 |
|
|
197,528 |
|
|
517,360 |
|
|
629,078 |
|
|||||
| Gross margin |
|
29,958 |
|
|
32,237 |
|
|
35,648 |
|
|
93,622 |
|
|
109,604 |
|
|||||
| Selling, administrative and other operating costs |
|
31,245 |
|
|
36,189 |
|
|
38,395 |
|
|
106,931 |
|
|
117,144 |
|
|||||
| Restructuring and severance costs |
|
546 |
|
|
411 |
|
|
2,017 |
|
|
2,203 |
|
|
2,800 |
|
|||||
| Impairment charges |
|
2,384 |
|
|
– |
|
|
79 |
|
|
2,395 |
|
|
426 |
|
|||||
| Operating loss |
|
(4,217 |
) |
|
(4,363 |
) |
|
(4,843 |
) |
|
(17,907 |
) |
|
(10,766 |
) |
|||||
| Interest income (expense), net |
|
(467 |
) |
|
(621 |
) |
|
(714 |
) |
|
(1,788 |
) |
|
(2,159 |
) |
|||||
| Foreign exchange gain (loss), net |
|
571 |
|
|
(266 |
) |
|
(151 |
) |
|
(23 |
) |
|
(252 |
) |
|||||
| Other income (expense), net |
|
(168 |
) |
|
(152 |
) |
|
(184 |
) |
|
(578 |
) |
|
(589 |
) |
|||||
| Loss before income taxes |
|
(4,281 |
) |
|
(5,402 |
) |
|
(5,892 |
) |
|
(20,296 |
) |
|
(13,766 |
) |
|||||
| Income tax provision |
|
556 |
|
|
23 |
|
|
165 |
|
|
774 |
|
|
671 |
|
|||||
| Net loss |
$ |
(4,837 |
) |
$ |
(5,425 |
) |
$ |
(6,057 |
) |
$ |
(21,070 |
) |
$ |
(14,437 |
) |
|||||
| Per share data: | ||||||||||||||||||||
| Basic: | ||||||||||||||||||||
| Net loss |
$ |
(0.22 |
) |
$ |
(0.25 |
) |
$ |
(0.29 |
) |
$ |
(0.98 |
) |
$ |
(0.68 |
) |
|||||
| Weighted average number of shares |
|
21,589 |
|
|
21,416 |
|
|
21,157 |
|
|
21,474 |
|
|
21,106 |
|
|||||
| Diluted: | ||||||||||||||||||||
| Net loss |
$ |
(0.22 |
) |
$ |
(0.25 |
) |
$ |
(0.29 |
) |
$ |
(0.98 |
) |
$ |
(0.68 |
) |
|||||
| Weighted average number of shares |
|
21,589 |
|
|
21,416 |
|
|
21,157 |
|
|
21,474 |
|
|
21,106 |
|
|||||
| Segment data: | ||||||||||||||||||||
| Net revenue: | ||||||||||||||||||||
| North American Staffing |
$ |
154,711 |
|
$ |
173,386 |
|
$ |
193,641 |
|
$ |
510,492 |
|
$ |
614,360 |
|
|||||
| International Staffing |
|
21,749 |
|
|
24,303 |
|
|
28,728 |
|
|
72,275 |
|
|
83,803 |
|
|||||
| North American MSP |
|
9,436 |
|
|
9,745 |
|
|
9,555 |
|
|
28,550 |
|
|
27,351 |
|
|||||
| Corporate and Other |
|
149 |
|
|
187 |
|
|
1,856 |
|
|
539 |
|
|
15,133 |
|
|||||
| Eliminations |
|
(104 |
) |
|
(346 |
) |
|
(604 |
) |
|
(874 |
) |
|
(1,965 |
) |
|||||
| Net revenue |
$ |
185,941 |
|
$ |
207,275 |
|
$ |
233,176 |
|
$ |
610,982 |
|
$ |
738,682 |
|
|||||
| Operating income (loss): | ||||||||||||||||||||
| North American Staffing |
$ |
2,691 |
|
$ |
2,576 |
|
$ |
4,365 |
|
$ |
5,366 |
|
$ |
10,796 |
|
|||||
| International Staffing |
|
551 |
|
|
196 |
|
|
342 |
|
|
1,121 |
|
|
1,274 |
|
|||||
| North American MSP |
|
944 |
|
|
491 |
|
|
1,120 |
|
|
2,189 |
|
|
3,185 |
|
|||||
| Corporate and Other |
|
(8,403 |
) |
|
(7,626 |
) |
|
(10,670 |
) |
|
(26,583 |
) |
|
(26,021 |
) |
|||||
| Operating loss |
$ |
(4,217 |
) |
$ |
(4,363 |
) |
$ |
(4,843 |
) |
$ |
(17,907 |
) |
$ |
(10,766 |
) |
|||||
| Work days |
|
63 |
|
|
65 |
|
|
63 |
|
|
187 |
|
|
187 |
|
|||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (in thousands) | |||||||
|
Nine Months ended |
|||||||
|
August 2, 2020 |
|
July 28, 2019 |
|||||
| Cash, cash equivalents and restricted cash beginning of the period |
$ |
38,444 |
|
$ |
36,544 |
|
|
| Cash used in all other operating activities |
|
(4,821 |
) |
|
(10,561 |
) |
|
| Changes in operating assets and liabilities |
|
17,903 |
|
|
20,722 |
|
|
| Net cash provided by operating activities |
|
13,082 |
|
|
10,161 |
|
|
| Purchases of property, equipment, and software |
|
(3,925 |
) |
|
(6,305 |
) |
|
| Net cash provided by (used in) all other investing activities |
|
589 |
|
|
78 |
|
|
| Net cash used in investing activities |
|
(3,336 |
) |
|
(6,227 |
) |
|
| Net draw-down of borrowings |
|
5,000 |
|
|
5,000 |
|
|
| Debt issuance costs |
|
(331 |
) |
|
(621 |
) |
|
| Net cash used in all other financing activities |
|
(74 |
) |
|
(316 |
) |
|
| Net cash provided by financing activities |
|
4,595 |
|
|
4,063 |
|
|
| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
(463 |
) |
|
(633 |
) |
|
| Net increase in cash, cash equivalents and restricted cash |
|
13,878 |
|
|
7,364 |
|
|
| Cash, cash equivalents and restricted cash end of the period |
$ |
52,322 |
|
$ |
43,908 |
|
|
| Cash paid during the period: | |||||||
| Interest |
$ |
1,858 |
|
$ |
2,367 |
|
|
| Income taxes |
$ |
1,445 |
|
$ |
1,174 |
|
|
| Reconciliation of cash, cash equivalents and restricted cash end of the period: | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents |
$ |
30,928 |
|
$ |
36,031 |
|
|
| Restricted cash included in Restricted cash and short term investments |
|
21,394 |
|
|
7,877 |
|
|
| Cash, cash equivalents and restricted cash, at end of period |
$ |
52,322 |
|
$ |
43,908 |
|
|
| Condensed Consolidated Balance Sheets | |||||||
| (in thousands, except share amounts) | |||||||
|
August 2, 2020 |
November 3, 2019 |
||||||
| ASSETS | |||||||
| CURRENT ASSETS: | |||||||
| Cash and cash equivalents |
$ |
30,928 |
|
$ |
28,672 |
|
|
| Restricted cash and short-term investments |
|
24,285 |
|
|
12,794 |
|
|
| Trade accounts receivable, net of allowances of $235 and $117, respectively |
|
108,395 |
|
|
135,950 |
|
|
| Other current assets |
|
7,067 |
|
|
7,252 |
|
|
| TOTAL CURRENT ASSETS |
|
170,675 |
|
|
184,668 |
|
|
| Property, equipment and software, net |
|
23,706 |
|
|
25,890 |
|
|
| Right of use assets – operating leases |
|
40,146 |
|
|
– |
|
|
| Other assets, excluding current portion |
|
6,802 |
|
|
7,446 |
|
|
| TOTAL ASSETS |
$ |
241,329 |
|
$ |
218,004 |
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| CURRENT LIABILITIES: | |||||||
| Accrued compensation |
$ |
16,412 |
|
$ |
21,507 |
|
|
| Accounts payable |
|
27,010 |
|
|
36,341 |
|
|
| Accrued taxes other than income taxes |
|
10,292 |
|
|
11,244 |
|
|
| Accrued insurance and other |
|
19,077 |
|
|
24,654 |
|
|
| Operating lease liabilities |
|
7,552 |
|
|
– |
|
|
| Income taxes payable |
|
955 |
|
|
1,570 |
|
|
| TOTAL CURRENT LIABILITIES |
|
81,298 |
|
|
95,316 |
|
|
| Accrued payroll taxes and other, excluding current portion |
|
21,099 |
|
|
12,029 |
|
|
| Operating lease liabilities, excluding current portion |
|
39,442 |
|
|
– |
|
|
| Deferred gain on sale of real estate, excluding current portion |
|
– |
|
|
20,270 |
|
|
| Income taxes payable, excluding current portion |
|
289 |
|
|
289 |
|
|
| Deferred income taxes |
|
11 |
|
|
17 |
|
|
| Long-term debt |
|
58,930 |
|
|
53,894 |
|
|
| TOTAL LIABILITIES |
|
201,069 |
|
|
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 – 21,702,078 and 21,367,821 shares, respectively |
|
2,374 |
|
|
2,374 |
|
|
| Paid-in capital |
|
79,686 |
|
|
77,688 |
|
|
| (Accumulated deficit) retained earnings |
|
(16,777 |
) |
|
(10,917 |
) |
|
| Accumulated other comprehensive loss |
|
(6,306 |
) |
|
(6,801 |
) |
|
| Treasury stock, at cost; 2,035,925 and 2,370,182 shares, respectively |
|
(18,717 |
) |
|
(26,155 |
) |
|
| TOTAL STOCKHOLDERS’ EQUITY |
|
40,260 |
|
|
36,189 |
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
241,329 |
|
$ |
218,004 |
|
|
|
GAAP to Non-GAAP Reconciliations |
|||||||||
|
(in thousands) |
|
||||||||
|
|
|
|
|
|
|
||||
|
|
|
Three Months Ended |
|
||||||
|
|
|
August 2, 2020 |
|
July 28, 2019 |
|
||||
| Reconciliation of GAAP net loss to Non-GAAP net loss: | |||||||||
| GAAP net loss |
$ |
(4,837 |
) |
$ |
(6,057 |
) |
|||
| Selling, administrative and other operating costs |
|
– |
|
|
(486 |
) |
(c) | ||
| Restructuring and severance costs |
|
546 |
|
(a) |
|
2,017 |
|
(d) | |
| Impairment Costs |
|
2,384 |
|
(b) |
|
79 |
|
||
| Non-GAAP net loss |
$ |
(1,907 |
) |
$ |
(4,447 |
) |
|||
|
Three Months Ended |
|||||||||
|
August 2, 2020 |
|
July 28, 2019 |
|||||||
| Reconciliation of GAAP net loss to Adjusted EBITDA: | |||||||||
| GAAP net loss |
$ |
(4,837 |
) |
$ |
(6,057 |
) |
|||
| Selling, administrative and other operating costs |
|
– |
|
|
(486 |
) |
(c) | ||
| Restructuring and severance costs |
|
546 |
|
(a) |
|
2,017 |
|
(d) | |
| Impairment Costs |
|
2,384 |
|
(b) |
|
79 |
|
||
| Depreciation and amortization |
|
1,884 |
|
|
1,769 |
|
|||
| Share-based compensation expense |
|
414 |
|
|
294 |
|
|||
| Total other (income) expense, net |
|
64 |
|
|
1,049 |
|
|||
| Provision for income taxes |
|
556 |
|
|
165 |
|
|||
| Adjusted EBITDA |
$ |
1,011 |
|
$ |
(1,170 |
) |
|||
Contacts
Investor Relations Contacts:
Volt Information Sciences, Inc.
voltinvest@volt.com
Joe Noyons
Three Part Advisors
jnoyons@threepa.com
817-778-8424