ModusLink Global Solutions™, Inc. (the “Company”) (NASDAQ:
MLNK), on December 10, 2015, reported financial results for its first
quarter of fiscal year 2016 ended October 31, 2015. Results for the
three month period ended October 31, 2015 are summarized in the
following paragraphs. For a full discussion of the results, please see
the Company's report on Form 10-Q, which can be accessed through www.moduslink.com.
First Quarter Financial Summary
-
Net revenue of $141.1 million for the three months ended October 31,
2015, as compared to $187.4 million in the same period in the prior
year.
-
Gross margin of 8.8% for the three months ended October 31, 2015, as
compared to 10.0% in the same period in the prior year.
-
SG&A expenses of $14.3 million for the three months ended October 31,
2015, compared to $15.5 million in the same period in the prior year.
-
Operating loss of $(2.8) million for the three months ended October
31, 2015, compared to operating income of $1.1 million in the same
period in the prior year.
-
Adjusted EBITDA of $0.7 million for the three months ended October 31,
2015, compared to adjusted EBITDA of $7.5 million in the same period
in the prior year.
-
Net loss of $(14.8) million, or $(0.29) per basic and diluted share,
for the three months ended October 31, 2015, compared with net income
of $0.2 million, or $0.00 per basic and diluted share, in the same
period in the prior year.
The decrease in net revenue, gross margin, operating income and adjusted
EBITDA for the three months ended October 31, 2015, as compared to the
same period in the prior year, was primarily driven by decreased
revenues from a client in the computing market and an aftermarket
services program related to the repair and refurbishment of mobile
devices, offset by an increase in revenue from certain consumer
electronics clients. The lower revenue from the computing market clients
affected results in the Americas, Asia and Europe. The lower revenue
from the aftermarket services program affected results in the Americas.
For the three months ended October 31, 2015, adjusted EBITDA was $0.7
million compared to adjusted EBITDA of $7.5 million for the same period
in the prior year. EBITDA represents earnings before interest, income
tax expense, depreciation and amortization, and adjusted EBITDA
represents EBITDA excluding certain items. Please refer to the non-GAAP
information and table reconciling the Company’s adjusted EBITDA to its
GAAP net income (loss) below.
In addition to an acquisition that would enhance our existing
comprehensive supply chain logistics services business, we are
interested in acquiring (including but not limited to) an industrial,
defense or electronics related business (or businesses) with at least
$25 million of adjusted EBITDA. Preferred opportunities would have
several of the following attributes: (a) existing (or have the potential
to achieve a) sustainable competitive advantage, (b) value creation
opportunities through operational improvement, (c) a track record of, or
future potential for, high return on invested capital (d) strong free
cash flows, (e) demonstrated consistent earnings power, (f) strong brand
and/or customer value proposition, and (g) a strong management team. We
would also consider special situations such as a business with
significant U.S. income (e.g. royalty/licensing portfolios, structured
equity, etc.), portfolios of businesses, solving owners’ monetization,
exit or liquidity needs/challenges, situations requiring creativity and
flexibility to solve either transaction structuring challenges or
specific business issues (e.g. litigation, environmental liability,
etc.), and businesses challenged with patent expirations, run-off
income, declining segments, or similar situations.
About ModusLink Global Solutions, Inc.
ModusLink Global Solutions, Inc. (NASDAQ: MLNK), through its
wholly-owned subsidiaries, ModusLink Corporation and ModusLink PTS, Inc.
(together “ModusLink"), executes comprehensive supply chain and
logistics services that are designed to improve clients’ revenue, cost,
sustainability and customer experience objectives. ModusLink is a
trusted and integrated provider to the world’s leading companies in
consumer electronics, communications, computing, medical devices,
software and retail. ModusLink’s operations are supported by more than
25 sites across North America, Europe, and the Asia/Pacific region. For
details on ModusLink’s flexible and scalable solutions visit www.moduslink.com
and www.valueunchained.com,
the blog for supply chain professionals.
Non-GAAP Information
In addition to the financial measures prepared in accordance with
generally accepted accounting principles, the Company uses adjusted
EBITDA, a non-GAAP financial measure, to assess its performance. EBITDA
represents earnings before interest, income tax expense, depreciation
and amortization. We define adjusted EBITDA as EBITDA excluding the
effects of SEC inquiry and financial restatement costs, strategic
consulting and other related professional fees, restructuring,
share-based compensation, unrealized foreign exchange gains and losses,
net, other non-operating gains and losses, net, and gains and losses,
and equity in gains and losses, of affiliates and impairments.
We believe that providing adjusted EBITDA to investors is useful, as
this measure provides 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 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 the
adjusted EBITDA financial measure assists 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.
Adjusted EBITDA is a non-GAAP financial measure and should not be
considered in isolation or as a substitute for financial information
provided in accordance with U.S. GAAP. This non-GAAP financial measure
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.
This release contains forward-looking statements, which address a
variety of subjects. 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
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 Annual Report
on Form 10-K. Forward-looking statements represent management’s current
expectations and are inherently uncertain. The Company does not
undertake any obligations to update forward-looking statements made by
it.
|
ModusLink Global Solutions, Inc. and Subsidiaries
|
Condensed Consolidated Balance Sheets
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
October 31,
|
|
July 31,
|
|
|
|
2015
|
|
|
2015
|
Assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
144,143
|
|
$
|
119,431
|
Trading securities
|
|
|
42,392
|
|
|
78,716
|
Accounts receivable, net
|
|
|
170,150
|
|
|
131,216
|
Inventories
|
|
|
57,754
|
|
|
48,740
|
Funds held for clients
|
|
|
20,683
|
|
|
21,807
|
Prepaid and other current assets
|
|
|
29,834
|
|
|
13,732
|
Total current assets
|
|
|
464,956
|
|
|
413,642
|
Property and equipment, net
|
|
|
22,733
|
|
|
22,736
|
Other assets
|
|
|
9,923
|
|
|
10,124
|
Total assets
|
|
$
|
497,612
|
|
$
|
446,502
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
185,260
|
|
$
|
120,118
|
Accrued restructuring
|
|
|
1,453
|
|
|
1,528
|
Accrued expenses
|
|
|
38,504
|
|
|
38,970
|
Other current liabilities
|
|
|
50,483
|
|
|
50,737
|
Total current liabilities
|
|
|
275,700
|
|
|
211,353
|
Notes payable
|
|
|
79,079
|
|
|
77,864
|
Other long-term liabilities
|
|
|
13,380
|
|
|
12,684
|
Total liabilities
|
|
|
368,159
|
|
|
301,901
|
|
|
|
|
|
Stockholders' equity:
|
|
|
129,453
|
|
|
144,601
|
Total liabilities and stockholders' equity
|
|
$
|
497,612
|
|
$
|
446,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ModusLink Global Solutions, Inc. and Subsidiaries
|
Condensed Consolidated Statements of Operations
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Three Months Ended October 31,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
Fav (Unfav)
|
Net revenue
|
|
$
|
141,089
|
|
|
$
|
187,444
|
|
|
(24.7
|
%)
|
Cost of revenue
|
|
|
128,637
|
|
|
|
168,606
|
|
|
23.7
|
%
|
Gross profit
|
|
|
12,452
|
|
|
|
18,838
|
|
|
(33.9
|
%)
|
|
|
|
8.8
|
%
|
|
|
10.0
|
%
|
|
(1.2
|
%)
|
Operating expenses:
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
14,252
|
|
|
|
15,522
|
|
|
8.2
|
%
|
Amortization of intangible assets
|
|
|
-
|
|
|
|
268
|
|
|
-
|
|
Restructuring, net
|
|
|
1,007
|
|
|
|
1,901
|
|
|
47.0
|
%
|
Total operating expenses
|
|
|
15,259
|
|
|
|
17,691
|
|
|
13.7
|
%
|
Operating income (loss)
|
|
|
(2,807
|
)
|
|
|
1,147
|
|
|
(344.7
|
%)
|
Other income (expense), net
|
|
|
(11,116
|
)
|
|
|
224
|
|
|
(5062.5
|
%)
|
Income (loss) before taxes
|
|
|
(13,923
|
)
|
|
|
1,371
|
|
|
(1115.5
|
%)
|
Income tax expense
|
|
|
850
|
|
|
|
1,157
|
|
|
26.5
|
%
|
Gains of affiliates, net of tax
|
|
|
-
|
|
|
|
(8
|
)
|
|
-
|
|
Net income (loss)
|
|
$
|
(14,773
|
)
|
|
$
|
222
|
|
|
(6754.5
|
%)
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$
|
(0.29
|
)
|
|
$
|
0.00
|
|
|
|
Diluted net income (loss) per share
|
|
$
|
(0.29
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used in:
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
51,766
|
|
|
|
51,875
|
|
|
|
Diluted earnings per share
|
|
|
51,766
|
|
|
|
52,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ModusLink Global Solutions, Inc. and Subsidiaries
|
Condensed Consolidated Statements of Operations Information by
Operating Segment
|
(in thousands)
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Three Months Ended October 31,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
Net revenue:
|
|
|
|
|
Americas
|
|
$
|
33,211
|
|
|
$
|
81,798
|
|
Asia
|
|
|
53,931
|
|
|
|
42,955
|
|
Europe
|
|
|
44,743
|
|
|
|
54,415
|
|
e-Business
|
|
|
9,204
|
|
|
|
8,276
|
|
Total net revenue
|
|
$
|
141,089
|
|
|
$
|
187,444
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
Americas
|
|
$
|
(3,086
|
)
|
|
$
|
1,618
|
|
Asia
|
|
|
3,371
|
|
|
|
3,353
|
|
Europe
|
|
|
(1,031
|
)
|
|
|
(1,378
|
)
|
e-Business
|
|
|
(504
|
)
|
|
|
161
|
|
Total segment operating income (loss)
|
|
|
(1,250
|
)
|
|
|
3,754
|
|
Corporate-level activity
|
|
|
(1,557
|
)
|
|
|
(2,607
|
)
|
Total operating income (loss)
|
|
$
|
(2,807
|
)
|
|
$
|
1,147
|
|
|
|
|
|
|
|
|
|
|
|
|
ModusLink Global Solutions, Inc. and Subsidiaries
|
Reconciliation of Selected Non-GAAP Measures to GAAP Measures
|
(in thousands)
|
|
|
|
|
|
Net income (loss) to Adjusted EBITDA1
|
|
(unaudited)
|
|
|
Three Months Ended October 31,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(14,773
|
)
|
|
$
|
222
|
|
Interest income
|
|
|
(88
|
)
|
|
|
(64
|
)
|
Interest expense
|
|
|
2,729
|
|
|
|
2,667
|
|
Income tax expense
|
|
|
850
|
|
|
|
1,157
|
|
Depreciation
|
|
|
1,955
|
|
|
|
2,810
|
|
Amortization of intangible assets
|
|
|
-
|
|
|
|
268
|
|
EBITDA
|
|
|
(9,327
|
)
|
|
|
7,060
|
|
|
|
|
|
|
SEC inquiry and financial restatement costs
|
|
|
(178
|
)
|
|
|
(23
|
)
|
Strategic consulting and other related professional fees
|
|
|
7
|
|
|
|
377
|
|
Restructuring
|
|
|
1,007
|
|
|
|
1,901
|
|
Share-based compensation
|
|
|
456
|
|
|
|
409
|
|
Unrealized foreign exchange (gains) losses, net
|
|
|
729
|
|
|
|
(54
|
)
|
Other non-operating (gains) losses, net
|
|
|
7,924
|
|
|
|
(2,123
|
)
|
(Gains) of affiliates and impairments
|
|
|
42
|
|
|
|
(8
|
)
|
Adjusted EBITDA
|
|
$
|
660
|
|
|
$
|
7,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, restructuring, share-based compensation,
unrealized foreign exchange gains and losses, net, other non-operating
gains and losses, net, and gains and losses, and equity in gains and
losses, of affiliates and impairments.
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