ModusLink Global Solutions' CEO Discusses Q1 2012 Results - Earnings Call Transcript

ModusLink Global Solutions (MLNK)

Q1 2012 Earnings Call

December 05, 2011 5:00 pm ET


Steven G. Crane - Chief Financial Officer and Principal Accounting Officer

Joseph C. Lawler - Chief Executive Officer, President, Executive Director, Chairman of Business Development Committee and Member of Technology Committee


Sam Rebotsky



Ladies and gentlemen, thank you for standing by, and welcome to the ModusLink First Quarter Fiscal 2012 Investor Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Monday, December 5, 2011. Your speakers for today are Joseph Lawler, President and Chief Executive Officer; Steven Crane, Chief Financial Officer.

Mr. Crane, you may begin.

Steven G. Crane

Thank you, France. Good afternoon, everyone, and thank you for joining us for ModusLink Global Solutions Fiscal 2012 First Quarter Conference Call. I'm Steve Crane, CFO, and I'm joined today by Joe Lawler, President and CEO.

In just a few moments, Joe will share his thoughts on the company's financial performance. After Joe's comments, I will review, in more detail, our fiscal 2012 first quarter results, which we released earlier today. Joe will then conclude our prepared remarks with an update on our strategic initiatives.

Before we start, I want to remind you that this call is being broadcast as a live webcast from our website at Please also note that the information we're about to discuss includes forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed herein. Factors that could contribute to such differences include, but are not limited to, those items noted and included in the company's SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The forward-looking information that is provided by the company in this call represents the company's outlook as of today, and we do not undertake any obligation to update forward-looking statements made by us. Subsequent events and developments may cause the company's outlook to change.

During this call, we'll be referring to non-GAAP measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure can be found in our earnings release issued earlier today, a copy of which is posted in the Investor's section of our website.

I'd now like to this call over to Joe Lawler. After our formal remarks, we'll be happy to take your questions. Joe?

Joseph C. Lawler

Thanks, Steve. Good afternoon, and thank you for joining us today. Before discussing our first quarter financial result and business strategy, I'd like to briefly discuss the announcement we made a few weeks ago that ModusLink's Board of Directors is undertaking a review of the strategic alternatives available to the company. We've taken concrete steps to put ModusLink on a trajectory of sustained growth in revenue and profits, including the ongoing execution of our investment and cost-reduction plan. As you'll hear today, we're pleased with the progress we're making executing our plan, and we have a positive view for our performance as a stand-alone entity.

That said, our board regularly evaluates our options to enhance stockholder value and the review its part of that commitment. The Board of Directors has retained Goldman Sachs as its financial adviser. And to facilitate this process, the board has formed a committee comprised solely of independent directors and led by Jeff Fenton to oversee the review and make associated recommendations to the full board. We will provide an update of this process after the board has completed its review and approved a definitive course of action.

In addition, we announced the separation of the Chairman and Chief Executive Officer roles at ModusLink as an enhancement to its governance structure. Frank Jules, who has been the company's presiding director, has been named nonexecutive Chairman of the Board. Frank has been a valuable member of our board, and I look forward to continuing to work with him and the rest of the board.

Turning now to our first quarter financial results and business strategy. There are 3 primary takeaways for our call today. First, we've seen a significant improvement of profitability. Gross profit margin increased to 12.6% of revenue, a significant increase from the same quarter last year reaching the highest level we've seen in nearly 2 years. The improvement compared to the same period last year was supported by a more favorable revenue mix that was driven by higher revenue in our Asia operations, as well as the effects of cost-reduction actions. These factors also contributed to reporting our first operating profit in 6 quarters.

Second, revenue in the first quarter was lower year-over-year as expected and seasonally higher compared to the fourth quarter of fiscal 2011. Our planned investments that we discussed in detail last quarter are specifically aimed at overcoming the pressures in the market and putting ModusLink on a path for sustainable revenue growth and improved profitability.

Third, we're making significant progress executing our cost-reduction plan, which we are phasing in as quickly as possible during fiscal 2012. We're pleased with the progress our management team and all employees are making executing our plan.

I will be talking in greater detail about this progress in all areas, including the appointment of a new leader of our sales and marketing team and several new client wins later in the call. But first, Steve will give you a more complete financial overview of our first quarter fiscal 2012 results.

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