Volt Information Sciences Inc (VISI)’s 4th Quarter 2014 Earnings Call Transcript

In our staffing services segment we have been intently focused on improving operating income and margin, particularly in our North American traditional staffing services – as well as reducing our exposures to customers with profitability or business terms are unfavorable. Two of the major changes that we made in North American staffing model, were moving enterprise accounts to a national rather than a regional account management structure, with all delivery being coordinated nationally. We believe that by focusing on superior delivery we will drive higher revenues at improved margins. Looking at the performance of the staffing services business in the 4th Quarter, we are encouraged by the progress as a result of our efforts to strengthen and realign the business. The segment achieved 5.8% increase in quarterly pro-forma operating profit on an 18.2% reduction in revenue. In addition, 4th Quarter pro-forma operating margin was 3.6% compared to 2.8% in the year-ago period, an 80 basis points improvement. This progress is primarily a result of the reorganization of the North American staffing operation as well as the improved profitability in project-based staffing, improved NSP results, and lower cost as a result of the divestiture of the VMS software business.

During fiscal 2014, we focused on increasing profitability with initiatives to expand margins and reduce operating expenses and we are pleased to report on the progress we have accomplished. We started to see the positive results of the continuing initiatives to reduce exposure to customers with unfavorable business terms and improved efficiencies. For the full-year, pro-forma operating income excluding the $3 million indirect tax recovery for the segment increased by $2.1 million or 9.4% versus last year, to $23.5 million. Consistent with our goal to return the company the profitability we have made strategic and operational changes in our organization to focus our offering on our core skill sets in the industries where Volt can consistently outperform the competition.

Average daily revenue for North American staffing business increased slightly for the 4th Quarter compared to the 3rd, marking the second sequential quarterly improvement since we began our initiatives. Also, for the second consecutive quarter, our increased business with favorable terms with existing and new customers offset reductions as customers are ready to decrease demand or unfavorable business terms. We are very encouraged by this positive trend. We do, however, anticipate that it should take approximately two more years to complete the renegotiation or exiting of unfavorable contracts due to the terms of the staffing contracts, as we have previously mentioned.

Our other segment had lower pro-forma revenue and profitability for the 4th Quarter primarily resulting from the telecommunications infrastructure, security services and printing businesses, as well as lower margins and decreased volume in the information technology infrastructure services.

Looking ahead, our strategic priorities remain consistent. We will continue to evaluate our individual businesses in service offerings as we seek to prioritize profit over top-line growth. We are confident that these actions will continue to improve our results as well as for the consistency of our returns across our portfolio of businesses. Our top priority remains profitability and we believe that our reorganization along with our focus on profitable business will drive higher revenue and enhance shareholder value.

In summary, 2014 was a pivotal year for Volt. We are encouraged by the financial and operating performance achieved during the last quarter, as well as a significant progress made in implementing our strategic vision in 2014. We remain fully confident in our ability to achieve profitability in the near-term as well as our targeted profitability level in line with or exceeding industry averages over the next few years. We are also committed to providing transparency into this ongoing process and will continue to highlight key milestones and goals in the coming quarters as the company continues to progress. Now I would like to turn the call over to Jim to discuss our financial results.

 

James Whitney, Senior Vice President and Chief Financial Officer

Thanks Ron. Let me start with the brief overview of our full-year results and then I’ll turn to discussion of our fiscal 4th Quarter for 2014. As Ron discussed earlier, we divested the computer systems business during the 1st Quarter of fiscal 2015. Therefore, the results of a Computer System segment are presented as discontinued operations and as such have been excluded from continuing operations and from segment results for all periods presented.