-
Net revenue of $102.5 million declined by 15.5% versus Q1 of fiscal
year 2017; decline primarily related to planned client exits; YOY
growth anticipated in Q4 of fiscal year 2018 based on several new
client and program wins
-
Gross margin of 8.9% improved by 120 basis points versus Q1 of fiscal
year 2017
-
Operating expenses of $12.9 million declined by $2.1 million or 13.8%
versus Q1 of fiscal year 2017
-
Operating loss of $3.8 million, a $1.8 million or 32.1% improvement
versus Q1 of fiscal year 2017
-
Net loss of $5.2 million, a $3.3 million or 38.7% improvement versus
Q1 of fiscal year 2017
WALTHAM, Mass.--(BUSINESS WIRE)--Dec. 7, 2017--
ModusLink Global Solutions™, Inc. (the “Company” or
“ModusLink”) (NASDAQ: MLNK), announced today its financial results for
its first quarter of fiscal year 2018 ended October 31, 2017. 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.
Additionally, ModusLink will soon be publishing its first quarter of
fiscal year 2018 Investor Presentation, which will be posted in the
Investor Relations section of the Company’s website and also filed as an
exhibit on Form 8-K with the Securities and Exchange Commission.
Commenting on the Company’s financial results and operational
performance, Jim Henderson, Chief Executive Officer of ModusLink stated,
“We executed on our plan in fiscal 2017 and continued to carry through
on our margin and expense programs during the first quarter of fiscal
2018 by leveraging process improvements and investments in automation.
The majority of the revenue decline was due to planned client exits,
though we did have one client in the Americas that exited earlier than
anticipated which adversely impacted revenue. With that said, over the
past several quarters, we have won a number of new accounts and have
been awarded new programs from many of our long-standing client
partners. There is a lot of momentum building on the sales front, though
based on the timing associated with client onboarding and new program
roll-outs, we anticipate the growth story for ModusLink will begin to
materialize in our fiscal fourth quarter and carry into fiscal 2019.”
“Operationally, our team is delivering for our clients. The investments
we have and continue to make throughout our footprint have resulted not
only in better gross margins and efficiencies, they have led to
increased client satisfaction, which is what we have been focused on
throughout. We invested in our systems and automation; revamped our
Sales and Account Development teams to provide greater value to our
clients; and have rolled-out a clear strategy for them to become more
than just a physical supply chain provider. We expect to see
year-over-year improvements in gross margins, operating expenses and
bottom-line results in fiscal 2018.”
First Quarter Financial Results Summary
Net Revenue The Company reported net revenue of
$102.5 million for the first quarter ended October 31, 2017, as compared
to $121.3 million for the same period in the prior year, a decline of
$18.8 million or 15.5%. The year-over-year decline was primarily related
to planned client exits stemming from the Company’s corporate
transformation initiatives throughout fiscal year 2017. Additionally,
the decline stemmed from one client which exited one quarter prior to
plan, which adversely impacted net revenues in the Americas. Offsetting
this decline was higher revenues received from one client in the
computing industry, which positively impacted revenues in Asia.
Throughout the second half of fiscal year 2017 and during the first
quarter of fiscal year 2018, ModusLink was awarded several new programs
from both existing and new clients. However, the majority of these new
awards will not result in substantial revenue recognition until the
second half of fiscal year 2018 due to scheduled onboarding and client
roll-out timelines.
Gross Margin
Gross margin for the first quarter ended October 31, 2017 was 8.9%, as
compared to 7.7% for the same period in the prior year, an improvement
of 120 basis points. The improvement in gross margin was driven
primarily by a reduction in labor and facility costs related to the
Company’s turnaround initiatives. Offsetting this year-over-year
improvement were lower revenues in the Americas and in Europe, primarily
related to an unfavorable shift in volumes from clients in the consumer
electronics and consumer products industries, though this was partially
offset by corresponding declines in material costs and a reduction in
force. The Company anticipates gross margins will decline on a
sequential basis in the second quarter of fiscal year 2018 due primarily
to lower absorption rates based on revenue expectations, but also
anticipates improvements in gross margins in the second half of the
fiscal year as new clients are onboarded, resulting in year-over-year
improvements.
Operating Expenses
Total operating expenses for the fourth quarter ended October 31, 2017
were $12.9 million, as compared to $15.0 million in the same period in
the prior year, a reduction of $2.1 million or 13.8%. Within these
expenses, selling, general and administrative (“SG&A”) expenses for the
quarter ended October 31, 2017 were $12.9 million, as compared to $13.6
million for the quarter ended October 31, 2016, a reduction of $0.7
million or 5.4%. Driving the reduction in SG&A expenses were lower
employee-related costs associated with the Company’s ongoing turnaround
plan and lower costs related to outsourced services, consulting and
professional fees. Additionally, during the first quarter of fiscal year
2017, the Company incurred $1.4 million of net restructuring expenses,
whereas in the first quarter of fiscal 2018, net restructuring fees were
less than $0.1 million. The Company continues to focus on lowering its
operating expenses and has several programs underway to lower operating
expenses on a year-over-year basis, while continuing to invest in system
upgrades, automation, innovation, and growth-driven initiatives.
Operating Income (Loss)
The Company reported an operating loss of $3.8 million for the quarter
ended October 31, 2017, as compared to an operating loss of $5.6 million
for the same period in the prior year, an improvement of $1.8 million or
32.1%. Driving the reduction in operating loss for the comparable
periods were higher gross margins and lower operating expenses. As the
Company onboards new programs from both existing clients and new ones
obtained over the past three quarters, operating losses are anticipated
to be reduced further, primarily in the second half of fiscal year 2018.
Net Income (Loss)
The Company reported a net loss of $5.2 million or a net loss per basic
and diluted share of $0.09 for the first quarter ended October 31, 2017.
This compares to a net loss of $8.5 million or a loss per basic and
diluted share of $0.16 for the same period in the prior year and
represents a year-over-year improvement of $3.3 million or 38.7%.
EBITDA and Adjusted EBITDA
For the three months ended October 31, 2017, the Company reported
negative Earnings Before Interest, Taxes, Depreciation and Amortization
(“EBITDA”) of $0.3 million, as compared to negative EBITDA of $3.6
million for the same period in the prior year, a year-over-year
improvement of $3.3 million. The Company reported negative Adjusted
EBITDA of $1.8 million, as compared to negative Adjusted EBITDA of $1.6
million in the same period in the prior year, a decline of $0.2 million.
About ModusLink Global Solutions, Inc.
ModusLink Global Solutions, Inc. (NASDAQ: MLNK) is a leading global
provider of digital and physical supply chain solutions. The Company
helps its clients drive growth, lower costs and improve profitability,
while simultaneously enhancing the customer experience. With operations
supported by 21 sites across North America, Europe, and the Asia-Pacific
region, ModusLink partners with the world’s leading brands across a
diverse range of industries, including consumer electronics,
telecommunications, computing and storage, software and content,
consumer packaged goods, retail and luxury, among others. Our solutions
and services are designed to help global brands and companies expand
their share, across geographies and channels, while continuously
improving their end-to-end supply chains. For further details on
ModusLink’s solutions visit www.moduslink.com,
read the Company’s blog
for supply chain professionals, and follow us on LinkedIn,
Twitter,
Facebook
and YouTube.
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 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 Measures
This 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31,
|
|
|
|
July 31,
|
|
|
|
|
2017
|
|
|
|
2017
|
|
|
|
|
(unaudited)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
119,768
|
|
|
|
$
|
110,670
|
Trading securities
|
|
|
|
|
-
|
|
|
|
|
11,898
|
Accounts receivable, net
|
|
|
|
|
85,091
|
|
|
|
|
81,450
|
Inventories
|
|
|
|
|
31,535
|
|
|
|
|
34,369
|
Funds held for clients
|
|
|
|
|
12,333
|
|
|
|
|
13,454
|
Prepaid and other current assets
|
|
|
|
|
7,483
|
|
|
|
|
6,005
|
Total current assets
|
|
|
|
|
256,210
|
|
|
|
|
257,846
|
Property and equipment, net
|
|
|
|
|
15,446
|
|
|
|
|
18,555
|
Other assets
|
|
|
|
|
4,604
|
|
|
|
|
4,897
|
Total assets
|
|
|
|
$
|
276,260
|
|
|
|
$
|
281,298
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
74,507
|
|
|
|
$
|
71,476
|
Accrued restructuring
|
|
|
|
|
165
|
|
|
|
|
186
|
Accrued expenses
|
|
|
|
|
34,588
|
|
|
|
|
37,898
|
Funds held for clients
|
|
|
|
|
12,333
|
|
|
|
|
13,454
|
Other current liabilities
|
|
|
|
|
25,406
|
|
|
|
|
26,141
|
Total current liabilities
|
|
|
|
|
146,999
|
|
|
|
|
149,155
|
Notes payable
|
|
|
|
|
60,891
|
|
|
|
|
59,758
|
Other long-term liabilities
|
|
|
|
|
10,056
|
|
|
|
|
9,414
|
Total liabilities
|
|
|
|
|
217,946
|
|
|
|
|
218,327
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
58,314
|
|
|
|
|
62,971
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
276,260
|
|
|
|
$
|
281,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ModusLink Global Solutions, Inc. and Subsidiaries
|
Condensed Consolidated Statements of Operations
|
(in thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
Fav (Unfav)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
$
|
102,522
|
|
|
|
|
$
|
121,327
|
|
|
|
|
(15.5
|
%)
|
Cost of revenue
|
|
|
|
|
93,448
|
|
|
|
|
|
111,994
|
|
|
|
|
16.6
|
%
|
Gross profit
|
|
|
|
|
9,074
|
|
|
|
|
|
9,333
|
|
|
|
|
(2.8
|
%)
|
|
|
|
|
|
8.9
|
%
|
|
|
|
|
7.7
|
%
|
|
|
|
1.2
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
12,867
|
|
|
|
|
|
13,601
|
|
|
|
|
5.4
|
%
|
Restructuring, net
|
|
|
|
|
37
|
|
|
|
|
|
1,374
|
|
|
|
|
97.3
|
%
|
Total operating expenses
|
|
|
|
|
12,904
|
|
|
|
|
|
14,975
|
|
|
|
|
13.8
|
%
|
Operating loss
|
|
|
|
|
(3,830
|
)
|
|
|
|
|
(5,642
|
)
|
|
|
|
32.1
|
%
|
Other income (expense), net
|
|
|
|
|
(521
|
)
|
|
|
|
|
(2,352
|
)
|
|
|
|
77.8
|
%
|
Loss before taxes
|
|
|
|
|
(4,351
|
)
|
|
|
|
|
(7,994
|
)
|
|
|
|
45.6
|
%
|
Income tax expense
|
|
|
|
|
1,087
|
|
|
|
|
|
1,049
|
|
|
|
|
(3.6
|
%)
|
Gains on investments in affiliates, net of tax
|
|
|
|
|
(201
|
)
|
|
|
|
|
(500
|
)
|
|
|
|
(59.8
|
%)
|
Net loss
|
|
|
|
$
|
(5,237
|
)
|
|
|
|
$
|
(8,543
|
)
|
|
|
|
38.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share:
|
|
|
|
$
|
(0.09
|
)
|
|
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used in
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted earnings per share
|
|
|
|
|
55,260
|
|
|
|
|
|
54,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ModusLink Global Solutions, Inc. and Subsidiaries
|
Condensed Consolidated Statements of Operations Information by
Operating Segment
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
$
|
14,839
|
|
|
|
|
$
|
25,878
|
|
Asia
|
|
|
|
|
43,512
|
|
|
|
|
|
42,873
|
|
Europe
|
|
|
|
|
38,390
|
|
|
|
|
|
45,181
|
|
e-Business
|
|
|
|
|
5,781
|
|
|
|
|
|
7,395
|
|
Total net revenue
|
|
|
|
$
|
102,522
|
|
|
|
|
$
|
121,327
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
$
|
(2,199
|
)
|
|
|
|
$
|
(3,856
|
)
|
Asia
|
|
|
|
|
4,169
|
|
|
|
|
|
1,777
|
|
Europe
|
|
|
|
|
(2,860
|
)
|
|
|
|
|
(2,591
|
)
|
e-Business
|
|
|
|
|
(1,445
|
)
|
|
|
|
|
344
|
|
Total segment operating loss
|
|
|
|
|
(2,335
|
)
|
|
|
|
|
(4,326
|
)
|
Corporate-level activity
|
|
|
|
|
(1,495
|
)
|
|
|
|
|
(1,316
|
)
|
Total operating loss
|
|
|
|
$
|
(3,830
|
)
|
|
|
|
$
|
(5,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(5,237
|
)
|
|
|
|
$
|
(8,543
|
)
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
(164
|
)
|
|
|
|
|
(165
|
)
|
Interest expense
|
|
|
|
|
2,107
|
|
|
|
|
|
2,029
|
|
Income tax expense
|
|
|
|
|
1,087
|
|
|
|
|
|
1,049
|
|
Depreciation
|
|
|
|
|
1,892
|
|
|
|
|
|
2,022
|
|
EBITDA
|
|
|
|
|
(315
|
)
|
|
|
|
|
(3,608
|
)
|
|
|
|
|
|
|
|
|
|
|
SEC inquiry and financial restatement costs
|
|
|
|
|
-
|
|
|
|
|
|
2
|
|
Strategic consulting and other related professional fees
|
|
|
|
|
109
|
|
|
|
|
|
4
|
|
Executive severance and employee retention
|
|
|
|
|
16
|
|
|
|
|
|
300
|
|
Restructuring
|
|
|
|
|
37
|
|
|
|
|
|
1,374
|
|
Share-based compensation
|
|
|
|
|
292
|
|
|
|
|
|
192
|
|
Impairment of long-lived assets
|
|
|
|
|
10
|
|
|
|
|
|
-
|
|
Unrealized foreign exchange (gains) losses, net
|
|
|
|
|
348
|
|
|
|
|
|
(233
|
)
|
Other non-operating (gains) losses, net
|
|
|
|
|
(2,057
|
)
|
|
|
|
|
885
|
|
(Gains) on investments in affiliates and impairments
|
|
|
|
|
(201
|
)
|
|
|
|
|
(500
|
)
|
Adjusted EBITDA
|
|
|
|
$
|
(1,761
|
)
|
|
|
|
$
|
(1,584
|
)
|
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 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/20171207006234/en/
Source: ModusLink Global Solutions, Inc.
Investor Relations Contact: GW
Communications for ModusLink Glenn Wiener, 212-786-6011 gwiener@GWCco.com
|