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|ModusLink Global Solutions Reports Financial Results for Third Quarter of Fiscal 2010|
WALTHAM, Mass., Jun 08, 2010 (BUSINESS WIRE) --ModusLink Global Solutions(TM), Inc. (NASDAQ: MLNK) today reported financial results for its third quarter of fiscal year 2010 ended April 30, 2010.
Consolidated Financial Results
"Revenue for the third quarter of fiscal 2010 was less than the same quarter last year, primarily due to lower revenue from new client engagements. As we work to build our revenue from new engagements back toward the record levels achieved in fiscal 2009, the time required to start new programs and bring them to the point of generating significant revenue continues to be longer than what we experienced previously," said Joseph C. Lawler, chairman, president and chief executive officer of ModusLink Global Solutions. "However, we are encouraged with the signs of stabilization in our business, including higher unit volumes from certain client programs and revenue from our base business that is comparable to the same quarter last year."
"Gross margin for the third quarter was lower than the same period last year, primarily due to lower revenue and higher costs related to the start-up of new engagements. For the first nine months of this year, gross margin was 13%, which is within our previously stated target range and represents good margin expansion compared with the same period last year," continued Lawler.
"Looking forward, we continue to have a very compelling value proposition for outsourced supply chain, aftermarket and e-Business solutions and a high level of client satisfaction. Our pipeline of opportunities for new programs remains strong and is positioned to make a greater contribution to our revenue. In the near-term, we are focused on adding new client programs from existing and prospective clients, implementing our plans to bring new programs to the point of revenue generation faster and delivering the highest level of client service," continued Lawler.
ModusLink reported net revenue of $213.7 million for the third quarter of fiscal 2010, a decrease of 7.7% compared to net revenue of $231.5 million reported in the third quarter of fiscal 2009. Net revenue for the third quarter of 2010 reflects lower revenue from new client engagements compared with the third quarter of 2009, which was a record year for revenue from new engagements. Revenue for the third quarter of 2010 included $8.9 million from Tech for Less, which was acquired on December 4, 2009.
Gross profit for the third quarter of fiscal 2010 was $24.6 million, or 11.5% of revenue, compared to $32.4 million, or 14.0% of revenue, in the third quarter of fiscal 2009. The decrease in gross margin as a percentage of revenue in the third quarter of fiscal 2010 was primarily due to lower revenue and higher costs related to the start-up of new engagements compared to the same period last year.
Operating income for the third quarter of fiscal 2010 was $1.3 million compared to operating income of $2.7 million in the third quarter of fiscal 2009. The decline in operating income was principally due to lower revenue and gross margin in the third quarter of fiscal 2010 compared to the third quarter of the prior year.
Net loss for the third quarter of 2010 was $3.4 million, or ($0.08) per share, compared to net loss of $1.9 million, or ($0.04) per share, for the same period in fiscal 2009. Third quarter fiscal 2010 results included a loss from discontinued operations of $2.3 million, or ($0.05) per share, primarily due to updated sublease assumptions for a facility no longer being utilized for operations by the Company, compared to a loss from discontinued operations of $68 thousand, or ($0.00) per share, in fiscal 2009.
Excluding net charges related to depreciation, amortization of intangibles, stock-based compensation, restructuring and non-recurring charges, the Company reported non-GAAP operating income of $8.3 million for the third quarter of fiscal 2010, a 48.5% decrease from $16.1 million for the same period in fiscal 2009.
As of April 30, 2010, the Company had working capital of approximately $221.3 million compared to $237.0 million at July 31, 2009 and $236.7 million at April 30, 2009. Included in working capital as of April 30, 2010 were cash, cash equivalents, short-term investments and marketable securities totaling $160.2 million compared to $179.2 million at July 31, 2009 and $167.8 million at April 30, 2009. The Company concluded the quarter with no outstanding bank debt.
For the third quarter of fiscal 2010, net cash provided by operating activities of continuing operations was $3.7 million and additions to property and equipment were $3.1 million, and therefore free cash flow from operations was $535 thousand, compared to $16.0 million in the same period in 2009.
"We continue to effectively manage costs and maintain working capital efficiency," said Steven G. Crane, chief financial officer of ModusLink Global Solutions. "ModusLink has a very strong and liquid balance sheet, providing us with competitive advantage in our market and a platform for future acquisitions and long-term growth."
Based on current forecasts from its clients and expected contributions from new client engagements, ModusLink continues to expect a sequential improvement in revenue for the fourth quarter of fiscal 2010, compared to the third quarter of fiscal 2010. In addition, ModusLink continues to expect to generate positive free cash flow from operations for the full fiscal year 2010 and at a level similar to fiscal year 2009.
New Stock Repurchase Program Announced
The Company also announced that its Board of Directors has authorized the repurchase of up to $10 million of the Company's common stock from time to time over the next 18 months and that it has completed its previously announced repurchase program.
The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time. Any repurchased shares will be available for use in connection with the Company's stock plans and for other corporate purposes or may be retired. The repurchase program will be funded using the Company's working capital.
During the third quarter of fiscal 2010, the Company completed the stock repurchase program that was announced on June 9, 2009 and pursuant to which it was authorized to repurchase $15 million of common stock. In the third quarter, the Company repurchased 232,865 shares of its common stock for aggregate consideration of $2.2 million, bringing the total number of shares repurchased under the program to 1,805,105.
Conference Call Information
As previously announced, ModusLink Global Solutions, Inc. will hold a conference call to discuss its fiscal 2010 third quarter results at 5:00 p.m. ET on June 8, 2010. Investors can listen to the conference call on the Internet at http://www.ir.moduslink.com. To listen to the live call, go to the website at least 15 minutes prior to the start time to download and install the necessary audio software.
About ModusLink Global Solutions, Inc.
ModusLink Global Solutions, Inc. (NASDAQ: MLNK) designs and executes global supply chain, aftermarket and e-Business solutions -- across multiple channels -- for the world's leading technology and consumer brands. More than 25 years of experience developing business process outsourcing and technology solutions for the global value chain enables the Company to solve clients' cost, time-to-market, customer satisfaction and revenue objectives. ModusLink Global Solutions has headquarters in Waltham, Massachusetts and more than 25 facilities in 14 countries - giving it the largest global footprint in the industry. For additional information, visit http://www.moduslink.com or visit ModusLink's value chain blog, Value Unchained at http://www.valueunchained.com.
The Company believes that its non-GAAP measure of operating income/(loss) ("non-GAAP operating income/(loss)") provides investors with a useful, supplemental measure of the Company's operating performance by excluding the impact of non-cash charges and restructuring activities. Each of the excluded items was excluded because it may be considered to be of a non-operational or non-cash nature. Historically, the Company has recorded significant impairment and restructuring charges. These charges, as well as charges related to depreciation, amortization of intangible assets and stock-based compensation, have been excluded for the purpose of enhancing the understanding by both management and investors of the underlying baseline operating results and trends of the business, which management uses to evaluate our financial performance for purposes of planning and forecasting future periods. Non-GAAP operating income/(loss) does not have any standardized definition and, therefore, is unlikely to be comparable to similar measures presented by other reporting companies. Non-GAAP operating income/(loss) should not be evaluated in isolation of, or as a substitute for, the Company's financial results prepared in accordance with United States generally accepted accounting principles. The Company's usage of non-GAAP operating income/(loss), and the underlying methodology in excluding certain charges, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, incur such charges in future periods. A table reconciling the Company's non-GAAP operating income/(loss) to its GAAP operating income/(loss) and its GAAP net income/(loss) is included in the statement of operations information in this release. The Company defines "Free cash flow from operations" as net cash provided by (used in) operating activities of continuing operations less additions to property and equipment as shown on the Company's consolidated statements of cash flows. Management considers free cash flow from operations to be an important indicator of the Company's financial strength and the ability to generate liquidity because it reflects net cash generated from operations. Free cash flow from operations is not a measure determined in accordance with GAAP and may not be defined and calculated by other companies in the same manner. A table reconciling "Free cash flow from operations" to the GAAP measures of net cash provided by (used in) operating activities of continuing operations less additions to property and equipment is included in the statement of operations information 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.
This release contains forward-looking statements, which address a variety of subjects including, for example, the Company's pipeline of opportunities for new programs and their impact on revenue, near-term initiatives, the prospects for future growth and strategic acquisitions and the current expectations regarding revenue in the fourth quarter of fiscal 2010 and free cash flow from operations for fiscal 2010.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 success, including its ability to meet its revenue and operating income targets, maintain and improve its free cash flow from operations and cash position, expand its operations and revenue, lower its costs, improve its gross margins, sustain profitability, reach its long-term objectives and operate optimally, depends on its ability to execute on its business strategy and the continued and increased demand for and market acceptance of its services; global economic conditions, especially in the technology sector are uncertain and subject to volatility; demand for our clients' products may decline or may not achieve the levels anticipated by our clients; potential acquisitions may not be available on terms acceptable to the Company or at all; the Company's management may face strain on managerial and operational resources as they try to oversee the expanded operations; the Company may not realize the expected benefits of its restructuring and cost cutting actions; the Company may not be able to expand its operations in accordance with its business strategy; the Company's cash balances may not be sufficient to allow the Company to meet all of its business and investment goals; the Company may experience difficulties integrating technologies, operations and personnel in accordance with its business strategy; the Company derives a significant portion of its revenue from a small number of customers and the loss of any of those customers could significantly damage the Company's financial condition and results of operations; the Company frequently sells to its clients on a purchase order basis rather than pursuant to contracts with minimum purchase requirements, and therefore its sales and the amount of projected revenue that is actually realized are subject to demand variability; risks inherent with conducting international operations; tax rate expectations are based on current tax law and current expected income and may be affected by the jurisdictions in which profits are determined to be earned and taxed, changes in estimates of credits, benefits and deductions, the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties and the ability to realize deferred tax assets;the mergers and acquisitions and IPO markets are inherently unpredictable and liquidity events for companies in the Company's venture capital portfolio may not occur; and increased competition and technological changes in the markets in which the Company competes.For a detailed discussion of cautionary statements 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 the Company's most recent Quarterly Reporton Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management's current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us.
SOURCE: ModusLink Global Solutions
ModusLink Global Solutions, Inc.