Volt Information Sciences, Inc.
Q1 2018 Earnings Call Transcript

Published: 7 Jun 2018

[Operator:]

Ladies and gentlemen, greetings and welcome to the Volt Information Sciences' Second Quarter Fiscal 2018 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this program is being recorded. It is now my pleasure to introduce your host Lasse Glassen of Addo Investor Relations. Thank you. You may begin.

[Lasse Glassen:]

Good afternoon and thanks for joining us today for Volt Information Sciences' fiscal 2018 second quarter earnings conference call. On the call today is Linda Perneau, Interim Chief Executive Officer and President of Volt Workforce Solutions and Paul Tomkins, Senior Vice President and Chief Financial Officer. Before we begin today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to Volt Information Sciences' recent filings with the SEC for a more detailed discussion on the risks that could impact the company's future operating results and financial condition. Also on today's call, our speakers will reference certain non-GAAP financial measures, which we believe provide useful information for investors. A reconciliation of those measures to GAAP is included in the earnings release issued this afternoon, June 7, 2018. With that, it's now my pleasure to turn the call over to Volt's Interim Chief Executive Officer and President of Volt Workforce Solutions, Linda Perneau. Linda?

[Linda Perneau:]

Thank you, Lasse. Good afternoon and thank you for joining us today on our fiscal 2018 second quarter earnings conference call. Today, I want to introduce myself to you, share with you some highlights of my first week at Volt and last but not least provide some insight into our growth plans for Volt's Workforce Solutions or VWS, which we are executing. Paul Tomkins will also lead you through some brief financial highlights. I could not be more excited to be at Volt. I have spent the past week in Orange, California, fully immersing myself into the operations. I have had the opportunity to meet many talented and dedicated teams in sales, operations and support functions. I've also had the opportunity to speak to the entire VWS organization and to interact with multiple field teams. I am genuinely inspired by the stories and conversations that have been shared with me. And most importantly the dedication and commitment, our employees have to the organization, our valued clients and our field employees. With that, let me turn it over to Paul Tomkins, our CFO for a brief highlight on our second quarter results. After that, I will come back and provide you with my vision for where Volt is headed. Paul?

[Paul Tomkins:]

Thank you, Linda. This quarter, we continued to make good progress on our cost structure and [impairing] back the year-over-year revenue declines compared to the last several quarters. Excluding the impact of non-core businesses sold or shutdown during this past year as well as normalizing for the impact of foreign exchange, the year-over-year total company revenue decline would have been 7.8% on a same store basis. Revenue in the second quarter was $263.2 million, when compared to the prior year quarter, total company revenues declined $39.8 million. The revenue decline was driven primarily by decreases associated with the sale of Maintech and the quality assurance businesses of $21.2 million as well as a decrease in our North American Staffing segment of $15.7 million. The VWS revenue decline of 6.7% was significantly improved from last quarter's decline of 11.1%. Overall the total company gross margin percentage in the second quarter was 14.2%. On a same-store basis, gross margins declined approximately 100 basis points compared to the prior year. While we experienced improved margins in our MSP business, it was offset by competitive pricing pressure in our VWS business. While revenue generation remains a key focus, leveraging our selling, administrative and other operating costs to maintain profitability is also a top priority and we are pleased with our progress in this area during the second quarter of 2018. Selling, administrative and other operating costs in the second quarter decreased $8.3 million or 16.1% versus last year. Excluding the impact of businesses sold, selling, administrative and other operating costs were down 10.8% year-over-year. Our SG&A improvement is a result of continued focus on initiatives to reduce overall costs and improve efficiencies through process improvements and also by effectively managing and renegotiating key vendor arrangements. Subsequent to the end of the quarter, we also took certain restructuring actions which will improve SG&A by approximately $7 million in annualized savings on a go forward basis. This is due in part from efficiencies gained from our IT investment last year. On an adjusted basis, excluding businesses sold or exited over the last year as well as one-time expenses related to our legal or other matters, we have successfully reduced our annual SG&A run rate by approximately $19 million or 12%. As a result of the actions over the last three years, we will have eliminated approximately $39 million or 19% of our annual SG&A costs excluding businesses sold. Net loss in the second quarter of 2018 was $7.7 million compared to a loss of $0.9 million in the second quarter of last year. I would highlight that on an adjusted basis excluding special items, net loss was $7.9 million compared to a net loss $6.1 million in the comparable period. As of April 29, 2018, our total debt balance was $50 million, down $40 million from the prior year as a result of our continued efforts to fully monetize non-core assets and de-lever our balance sheet. As of June 1, our global available liquidity was $46.6 million compared to $48.3 million a year ago, consistent with seasonal trends. With respect to questions regarding our review of strategic alternatives, I wanted to refer everyone to yesterday's press release. With that, I will turn it back over to Linda.

[Linda Perneau:]

Thank you, Paul. Let me share some insights about where we are headed. We have already begun executing on a four-point plan, focused on driving ongoing improvement of revenue, gross margins, individual productivity and profitability. This plan is based on swift movement to set our teams up in an environment that allows them to more effectively deliver to our clients of all sizes and drive immediate improvement in gross margin. There is a fundamental behavior change that must occur. Among many things we need to shift to a performance driven and measured culture with both accountability and ownership at all levels of the organization. And now I will briefly touch on some of our operational initiatives. Our first initiative is to drive retail growth. We have strong influence with our retail customers and this is an area that can generate quick sales impacts due to the much shorter sales cycle involved compared to our larger customers. While we have already been working on this opportunity, expanding our retail sales force, we will now swiftly move to set our teams up in a structure that allows them to more specifically provide superior customer service balancing both retail and our larger clients. Our second focus is to expand our direct hire business. Expanding this business is a priority because progress in this area can be relatively quick and have a material impact on our profitability due to the high margins. We have recently made investments in this area and we are already seeing the returns on those investments. The third and fourth areas are to rebuild our client relationship capabilities and our new business development efforts. We will be improving and enhancing certain parts of these two efforts and fully expect to bring these projects to measurable results in short order. All of these efforts will propel healthy profitable growth, improve margins and allow us to be competitive in areas in which we excel. I believe it is time for Volt to become a better version of itself. We will not lose the integrity, values, and pride that resonates throughout the organization. This is however a new day, a new chapter at Volt and a story that I am incredibly proud to be a part of rewriting. In closing, I would like to take a minute to thank all of our amazing employees for their dedication and commitment to our company. Our employees are the backbone of our organization and I am genuinely grateful for the work they do every single day. I would also like to thank each of our valued clients for their partnerships and ongoing trust in Volt. We do not take that for granted and we fully intend to continue to provide superior service. To everyone on this call, thank you for your support and for joining us today. We will not be taking questions today. And I will ask for your patience as my tenure at Volt is just beginning. It is my intent to have good open communications moving forward. We look forward to speaking with you again when we report our fiscal 2018 third quarter results in September. Thank you.

[Operator:]

Thank you ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for participation and have a wonderful day.