Tema Electrification ETF (VOLT) research, news, and more from GeoInvesting

Company description

Fri, 13 Jan 2017 16:55:51 GMT

Volt Information Sciences, Inc. provides staffing and information technology (IT) infrastructure services in the United States and internationally. It operates through two segments, Staffing Services and Other. The Staffing Services segment provides contingent staffing, direct placement, staffing contracting and management, and other employment services; master vendor services; and managed service programs consisting of managing the procurement and on-boarding of contingent workers. This segment also offers technology outsourcing services and solutions, such as customer care call centers, and video and online gaming industry quality assurance testing services, as well as customer care solutions, including end-user and technical, sales, and retention support services; and project-based staffing services, such as project management and IT infrastructure outsourcing, data center management, enterprise technology implementation and integration, and corporate helpdesk services. It serves customers in various occupations, including accounting, finance, administrative, engineering, information technology, manufacturing, assembly, warehousing, and industrial. The Other segment provides IT infrastructure services, including IT hardware maintenance, storage, network and desktop products, remote monitoring for corporate data centers and networks, and planning, as well as migration and support services. The company serves multinational, national, and local customers. Volt Information Sciences, Inc. was founded in 1950 and is headquartered in New York, New York.

Research

Fri, 12 Apr 2019 18:29:33 GMT

Volt Information (AMEX:VISI) ($4.95; $104.8M market cap), an international provider of staffing services hit a new 52 week high yesterday. It seems we were to early in our restructuring turnaround call in 2017. We first dug into the VISI story in early 2017 as the Company was in the midst of selling off underperforming assets and going through cost cutting restructuring initiatives.

The process took longer than we had hoped and we closed out our position a year later in January of 2018 at a loss.

Over the last several months, shares have been in an uptrend and reached a new 52 week high of $5.00 in yesterday’s trading session. We also noticed a consistent amount of insider buying over the last several months. In its Q1 2019 results, the company showed top-line growth for the first time in over 26 quarters. Comments from management suggest that the turnaround looks to continue as 2019 moves along.

Research

Tue, 05 Jun 2018 14:43:47 GMT

Volt Information (AMEX:VISI) ($3.00; $63.0M market cap), an international provider of staffing services announced review of strategic alternatives:

“...the Company is fully engaged in a process to evaluate potential strategic alternatives to maximize shareholder value. Such strategic alternatives could include a sale of the Company or a sale of a division or divisions thereof, a strategic merger, a business combination or continuing as a standalone company executing on its business plan.”

In early January we stated:

“the restructuring turnaround was taking longer than we had hoped, but were willing to give management a few more quarters to begin to demonstrate that their efforts would begin to materialize into profitable growth. This quarter was yet another disappointment - we are going to look to close out our position. We may look to revisit it if the company’s turnaround regains traction.”

We never re-established a position, but will keep an eye on any developments surrounding the strategic review. The stock was at one point a part of “Buy on Pullback” Portfolio 5, but we closed out the position as we felt the turn-around story was taking a bit long to play out.

Please see the most recent emails discussing our rationale here.

Research

Fri, 12 Jan 2018 19:22:13 GMT

Volt Information (AMEX:VISI) ($4.10; $86.1M market cap), an international provider of staffing services, announced its Q4 2017 results:

Sales of $288.5 million vs $341.6 million in the prior year period and below analyst estimates of $300 million.
Non-GAAP EPS net loss of $0.29 vs Non-GAAP EPS of $0.23 and below analyst estimates of a loss of $0.01

Commentary from management:

“The turnaround strategy that we have executed over the past two years has successfully helped us address many of Volt’s operational challenges and we have a strong foundation from which we continue to build. During this time, we have dramatically simplified our operating structure through the sale of non-core assets, which has strengthened our balance sheet and liquidity position. At the same time, we have also been successful in streamlining our cost structure and gross margins continue to improve. While much has been accomplished, we now must ensure our efforts and investments convert to topline growth, as well as continue to explore a broad range of opportunities to enhance shareholder value. I look forward to overcoming Volt’s remaining challenges and emerging as a stronger company.”

In our early September 2017 update, we stated that the restructuring turnaround was taking longer than we had hoped, but were willing to give management a few more quarters to begin to demonstrate that their efforts would begin to materialize into profitable growth. This quarter was yet another disappointment - we are going to look to close out our position. We may look to revisit it if the company’s turnaround regains traction.

In early October shares got a lift as John Rudolf, a large stakeholder added 142,155 shares at an average price of $3.22. Mr. Rudolf now holds 2.3 million shares or a nearly 11% stake in the Company. This may offer a level of support for the stock.

We will be on the conference call later this afternoon (1PM EST).

Research

Wed, 01 Nov 2017 14:51:44 GMT

Volt Information (AMEX:VISI) ($4.20; market cap $90.3m), an international provider of staffing servicesannounced it has received $5 million in cash as part of early retirement of note and settlement agreement with NewNet Communications Technologies. Over the last week we have discussed the recent asset sales and insiders purchases that have helped propel VISI shares off recent 52 week lows. You can see our past coverage here.

Research

Thu, 26 Oct 2017 14:46:11 GMT

$VISI ($3.40) - Two days ago we discussed the asset sale the company announced. Our note can be seen here. VISI is an international provider of staffing services. Shares rose sharply, up over 60% on heavy volume (6 million shares; avg vol is 130k shares). It seems a portion of the volume was from John Rudolf, a large stakeholder who added 142,155 shares at an average price of $3.22. Mr. Rudolf now holds 2.3 million shares or a nearly 11% stake in the Company.

Research

Tue, 24 Oct 2017 15:21:29 GMT

VISI ($2.20, marked up pre-market), an international provider of staffing services, announced it has entered into a definitive agreement to sell its quality assurance testing business, a part of its Technology Outsourcing Services and Solutions segment.

VISI will receive $66.4 million in cash from Keywords International Limited, a leading international technical services provider to the global video games industry.

Quotes from management:

“The disposition of these non-core assets, which represent approximately 5% of Volt’s global revenue, will allow Volt to become a pure-play staffing company. I am confident that the Business will continue to prosper under Keywords’ management,” said Michael Dean, Volt’s President and Chief Executive Officer. “The anticipated cash proceeds from the sale will significantly strengthen Volt’s balance sheet and notably bolster our liquidity position. Importantly, this transaction will help streamline our operational focus within our core staffing business, where we are best positioned to create long-term shareholder value.”

In our early September 2017 update we stated that the restructuring turnaround was taking longer than we had hoped, but we are willing to give management a few more quarters to begin to demonstrate that their efforts will begin to materialize into profitable growth moving forward.

We feel this sale may have been one out of necessity as opposed to strategy as the company was dealing with debt covenants. We are still looking into what this sale will mean for the bottom line.

On June 14, 2017, we added VISI to our “Buy on Pullback” Mock Portfolio 5.0 at a price of $4.40 as we believed the selloff at the time was overdone and that management believed the restructuring process was still on schedule. We are obviously disappointed by the stock’s performance after its addition to the folio, but the current markup softens the blow somewhat.

Research

Fri, 08 Sep 2017 14:25:26 GMT

VISI ($3.05) provides staffing and information technology infrastructure services. The Company announced Q3 2017 results after hours yesterday:

Sales of $289.9 million vs $330.6 million in the prior year and below analyst estimates of $303.0 million
Net loss of $0.26 vs net loss of $0.22 and slightly ahead of analyst estimates of a loss of $0.28

Comments from management:

“We continued to add to our book of business with important new client relationships established in the quarter. However, third quarter revenues of $289.9 million fell short of our expectations. Initiatives are underway to improve our revenue performance in future periods and I am confident we can successfully meet our challenges to achieve sustainable profitable growth.”

The company’s new business strategy is showing promise (per conference call):

“Over a year ago, we implemented across selling strategy between our MSP and our staffing businesses recognizing both businesses ability to bring new revenue opportunity to each other’s business.

And this strategy is showing great science of success. For example, in our MSP, business we’ve won more new clients in the last two quarters than we have in several years. These wins not only increase the revenue for the MSP business, but the majority of these new customers will initiate or grow our staffing business as part of the engagements as well. Potentially, tens of millions of dollars of revenue that is truly incremental to our staffing side of the business. These wins will start to show revenue in the following two quarters.”

There was also an interesting exchange on why management is not able to buy back stock on the conference call yesterday:

Analyst David Wright:

“My last question goes back to the previous question or the previous person’s question, about insider purchases and you said on the last call and you’ve said on this call that no one’s able to buy stock. Is that because are being technical that you’re in the blackout period because you’ve got the earnings release or is this a persistent condition.”

CEO Michael Dean:

“It’s because – it’s beyond just the quarter release. It’s because of possession of material nonpublic information in this turnaround. And so when the SEC rules allow us to I know a number of us intend to buy.”

Analyst David Wright:

“So that waiting for you in a strategic alternatives process, is that correct?”

CEO Michael Dean:

“No. I can not speak to why, but it’s a material nonpublic information that we possess.”

While the restructuring turnaround is taking longer than we had hoped, we are willing to give management a few more quarters to begin to demonstrate that their efforts will begin to materialize into profitable growth moving forward. We’re also curious as to the nature of the information management possesses that is restricting them from buying stock.

Research

Wed, 02 Aug 2017 15:21:15 GMT

VISI ($3.60) - Yesterday, a bullish note was published on VISI, via Guru Focus, by an author that goes by the name of “shadowstock”. The author explains that the company is a “tremendous turnaround opportunity”. Among the key points of the article were:

The 21 trailing month market value dropped -55.92%. This contrasts with a period of multiple operational and financial improvements. These contrasting attributes only strengthen Volt's (VISI) case for short and long term mean reversion. The current market price is $3.65 per share or 76.39M.
During the trailing 21-month period, these are a few specific improvements. The sale of non-core businesses, management's focus and realization of higher margins. Material investment in information technology to improve competitive position, operations and reduce costs. System implementation completed this quarter. Twenty months ago a new turnaround specialist and CEO (Michael Dean ) recruited with Board level changes forced by activist investors. Additionally, this quarter received a long awaited tax refund payment used to pay down debt. VISI sits on 146M federal NOL and 55M in other federal tax credits.
Positive macro industry trends exist for temporary staffing. Further, the industry's fragmented attributes offer future MA activity for potential company sale of company or growth after a fully realized turnaround. Note today (07/31/17) staffing company CDI received a go private deal, up 33% today on news. Also, an industry study reported 2% of the workforce is temp. But, the current 2% workforce is a fraction of future years estimates of 10% based on macroeconomics and political trends. The trend higher for a fractionalized work force is inevitable.
Volt's temporary staffing business is healthy and a majority of total revenues. Technology and Engineering's permanent staffing business drags on its profitable progress. Additionally, opportunities exist if they focus exclusively on temp staffing and sell permanent placement business.
The current market price of $3.65 or 76 million market capitalization / 147M enterprise value does not fairly handicap management's value unlocking activities, low business risk profile, capital light requirements and the higher probabilistic future value. Also, VISI is historical and relative valuation cheap. (more on this covered below).
Management sits on an exceptional company requiring only modest improvements to grow its free cash flow with existing large revenue base. A small 1% improvement in operating margins is reachable. That change will indeed impact free cash flow and its tiny 76M market value with just 14.19M shares in the public float.
Additional positive factors to consider, 30% held by insiders with founding family at 20% coupled with proactive/activist shareholders (Glacier Peak Capital as one example). This ownership structure will continue pushing market value enhancements. Moreover, the lack of analyst coverage is not helping the stock price. VISI TTM revenue of 1.289 Billion, 61.70 revenue per share deserves and should see future coverage. Lastly, positive 2016 and 2015 insider activity with neutral 2017.

You can read the full article here.

VISI is currently on our Buy On Pullback Mock Portfolio 5.0, initiated at a price of $4.40. While disappointed with the performance of VISI since its inclusion in this mock portfolio, we intend to keep it in the portfolio for now. As we stated in our May 2017 Newsletter:

We are working to better understand the business and the company’s restructuring effort already in place to determine if there’s future potential for a larger, secular turnaround in VISI shares.

We are hoping that investors will digest the above article by shadowstock, as we believe it hones in on many of the key points that first attracted us to the company’s turnaround story.

Research

Mon, 03 Jul 2017 04:00:00 GMT

Volt Information Sciences Inc. (AMEX:VISI) “Raiser”

We don’t heavily rely on technical indicators, but we do watch a few that, from our experience, often signal the end of upward price resistance. One indicator we are particularly taking notice of is something we call a “raiser.” This moment occurs when we a large block of stock trades at levels below the prevailing bid price. This can signify that a big seller who wants to get out and decides to pull the plug instead of waiting around to find buyers at current prices. This allows shares to rise more freely. We often see shares move higher once this event takes place. We noticed this scenario with VISI late in the trading day on Friday June, 30 2017 as shares breached the $4.00 level. Recall we cited VISI was an addition to the Mock Pullback Portfolio 5.0, albeit risky. We will be watching shares closely to determine if selling pressure from a “liquidator” has abated. Please see our VISI coverage here.

Research

Wed, 14 Jun 2017 15:08:08 GMT

“Buy on Pullback” Mock Portfolio 5.0 Update

Just yesterday we introduced “Buy on Pullback” Mock Portfolio 5.0 with $IHC and $ARIS as our first two stocks qualifying for the portfolio. After having a call with $VISI management, we have also decided to include $VISI to the portfolio, as we believe the recent selloff was overdone and that management believes the restructuring process is still on schedule.

Please note that VISI is more of a longer-term play so we are not quite sure the stock will perform tremendously well during the mock portfolio tenure and there are still many risks associated with the turnaround. However, we do think it could recover what it has lost over the last few days. This would imply a return of 30%.

Research

Mon, 12 Jun 2017 14:45:15 GMT

VISI ($5.10) - On June 9, 2017 VISI reported its Q2 2017 results which we summarized here. The stock opened the morning of earnings with a muted reaction to the press release, but tanked during/after the related conference call. You can read the transcript here, where it's clearly evident that investors are nearing their last nerve regarding the length of time it is taken management to realize positive results from its restructuring of the last several years.

Management has been spinning the story that selling the Company’s non core assets, combined with cost cutting measures, will result in a return to profitability and revenue growth. While investors probably don't expect this to happen overnight, the weak Q2 numbers did not meet their expectations. We took a closer look at the Q2 10-Q to determine if we could get a better read on where the business is heading, what's still ailing it and if investors overreacted to the quarter. Here are a couple of our observations:

While revenues in all of the Company’s divisions are not growing (this is expected because the Company sold several of its non-core assets), we noticed that all of its losses came from one division. (pg. 14 of 10-Q)

Had it not been from the losses from its corporate division, which operates its managed service programs and information technology infrastructure services divisions, it looks like the Company would have been comfortably profitable.

We found verbiage in the 10-Q reiterating management's comments from prior quarters that management expects its restructuring initiatives to yield net savings of approximately $13.0 million.

What we are going to try to obtain a better understanding of:

It is unclear to us if the Company has realized any of the $13 million cost savings. If they have not, significant earnings accretion is eventually likely to be in the cards.
Why one of the activists that was pushing for change at the Company issued a press release several weeks ago stating that they were satisfied with the direction management was heading.
Why management is hanging onto its corporate division, where all of its losses are coming from. It’s possible we may start to become vocal publicly if we determine that this division should be separated from the Company in order to unlock value for stockholders.

Research

Fri, 09 Jun 2017 18:12:06 GMT

VISI ($5.80) announced Q2 2017 results:

Sales of $303.0 million vs $335.6 million in the prior year.
Non-GAAP net loss of $0.22 vs non-GAAP net loss of $0.10 in the prior year

Quotes from management:

“While the completion of large projects with several customers impacted second quarter revenue growth, we added to our book of business with important new client relationships established in the quarter, and grew our pipeline of new opportunities as we look ahead to the second half of fiscal 2017. Based on our steady progress, I remain highly confident in our ability to return Volt to sustained profitable growth.”

As we stated last quarter, VISI falls into a company that is at a restructuring inflection point that may not attract investor attention in the short the term because unimpressive financials can mask future potential earnings growth as the company’s paid down debt and begin to focus on top line growth.

Research

Thu, 09 Mar 2017 18:23:36 GMT

VISI ($7.30) announced Q1 2017 results:

Sales of $313.0 million vs $327 million in the prior year and below analyst estimates of $317.0 million
Non-GAAP net loss of $0.21 vs a loss of $0.37 in the prior year and ahead of analyst estimates of a loss of $0.24
Subsequent to the end of the first quarter, the IRS approved the Company’s federal tax refund of approximately $13 million

Quotes from management:

“Volt is off to a good start in fiscal 2017 with strong improvement in our year-over-year financial results and the recent completion of several key initiatives to strengthen our balance sheet. At the top line, we continue to make progress in stabilizing revenue from our existing book of business while establishing new client relationships. We also benefited from our ongoing focus on higher margin business as evidenced by the 110 basis point increase in gross margin compared to the prior year. As a result, we generated the best bottom line result for Volt in a first quarter in five years.

Mr. Dean continued, “In addition to our improving operational results, we also achieved key milestones that will further shore-up our balance sheet and improve our financial flexibility. During the quarter, we completed the amendment and extension of our $160.0 million financing program with PNC Bank. More recently, we completed the sale of Maintech for $18.3 million and we also received IRS approval for a federal tax refund of approximately $13 million. With these initiatives completed, I remain confident in our ability to continue executing our turnaround strategy, enhancing our financial and operational performance and driving shareholder value in fiscal 2017 and beyond.”

We began covering VISI as a special situation/restructuring play in mid January 2017. While the financial results were underwhelming for the current quarter, Q1 2017 marked the best quarter since 2012 for the bottom line. The company recently sold its last non-core asset (Maintech) for net proceeds of $13 million, and announced it will be receiving a tax refund of $13 million. It also amended financing loans with better terms to shore up its balance sheet. Management's current focus is now to drive top line growth leading to enhanced profitability. You can see our full coverage including our initial reasons for tracking the company here.

Similar to BXC, VISI falls into a company that is at a restructuring inflection point that may not attract investor attention in the short the term because unimpressive financials can mask future potential earnings growth as the company’s paid down debt and begin to focus on top line growth.

Research

Tue, 07 Mar 2017 17:20:55 GMT

VISI ($7.20) - Yesterday during the trading day, Livermore Partners, a significant shareholder, announced support for VISI’S new director appointments. David Neuhauser, the founder and managing partner at Livermore stated the following:

“We at Livermore commend the action taken by Volt at the end of last week to add two new independent directors to the Company's Board. The qualities I see in those individuals that have just joined the Board look to be similar to those of the candidates we had nominated in a letter we sent to the Company late last year. The Company has also been taking other positive steps, consistent with those we previously discussed with them. As a result, we have withdrawn our director nominations." Mr. Neuhauser added, "We continue to believe that the Volt stock remains significantly undervalued and much work is left to be done to increase shareholder value, but we have seen progress from a financial viewpoint and believe the right management team is now in place and pursuing the right strategies. We will continue to offer our viewpoints to Volt going forward."

On a related note, VISI sold its last remaining non-core asset for net $13.9 (net).

“We are pleased to announce the completion of the sale of Maintech and believe this business will continue to thrive under new ownership,” said Michael Dean, Volt’s President and Chief Executive Officer. “The divestiture of non-core assets has been an important part of our goal to simplify Volt’s corporate structure and streamline our operational focus. Similar to our previous divestitures, we are confident that the sale of Maintech will enable us to better allocate management attention and resources to opportunities within our core staffing business, where we believe we are best positioned to add value. In addition, the immediate cash proceeds from the transaction have significantly strengthened Volt’s balance sheet and improved our financial flexibility.”

You can see our full coverage, including our reasons for tracking on VISI here.

Research

Thu, 02 Feb 2017 18:58:29 GMT

VISI ($8.15) - We have gained more color on VISI restructuring initiatives. While we did not have a chance to speak with the CEO or CFO of the company, which is what we typically aim for, we spoke with a couple of sources who follow VISI very closely. Our key takeaways are:

The company has little to no exposure to H1B regulations that Trump may put into legislation. This confirms our DD in yesterday’s email.
Seasonality in the business exists. Typically, the second half of the year is stronger than the first.
None of the $15 million in cost savings management expects to realize in 2017 impacted 2016 results.
Prior management (before 2015) had pursued business opportunities outside the Company’s core staffing business. This partly is what led to the company’s sub par performance over the last several years. This led to the new CEO and CFO coming aboard in 2015.
One of our sources believes that VISI offers an interesting risk/reward scenario, in that he believes if VISI does not successfully carry out its restructuring that it will become a takeover candidate. He further explained that the industry price to sales multiple of its competitors (losing or making money) is in the range between 0.5 and 1. VISI currently trades at a price to sales ratio of 0.13. If VISI would trade at the low end of the above-mentioned range, shares would be worth $30.95. We plan to look at the balance sheets and margins of some of its competitors.
The general feeling from the street is that VISI will receive another $30 to $50 million in cash from a tax refund issue and the sale of its last remaining non-core asset. There is some disagreement among shareholders on what they think the Company should do with the cash, pay down some its $100 million in debt or return some it to shareholders.

Caveats:

When we originally published our reasons for tracking we mentioned that analyst 2017 EPS estimates were $0.47. Today our Reuters platform shows 2017 EPS estimates at a loss of $0.40. We were able to confirm that the correct GAAP estimate for 2017 calls for a loss of $0.04. The company lost $0.70 in 2016 on a GAAP basis. EPS estimates for fiscal 2018 are $0.39. Obviously, we would prefer a much stronger EPS number for 2017, but we believe the analyst is being conservative do to some of the complexity regarding the restructuring and the fact that the company has had a history of missing analyst estimates.
We calculate that the last remaining non-core asset for sale will reduce the Company’s net income by $2 to $4 million. However it will allow it to focus on its core staffing business and possibly lead to investors bidding up shares closer to the industry average price to sales multiples, even though the company may not have a stellar 2017 bottom line performance.

We will continue to reach out directly to management to obtain more color on the story. In the short term, we believe the stock could react positively to the sale of its last non core asset. If this does occur, short term investors may not want to hang around as the longer term benefits of the restructuring process take hold.

Research

Tue, 31 Jan 2017 16:25:27 GMT

VISI ($8.65) - We spent some time yesterday looking through VISI’s (staffing services) most recent 10-K to determine if the company had any risks related to President Trump’s new H-1B Visa Bill. Due to this new development, we wanted to take a closer look at VISI and how this new bill could possibly affect them. We looked at the most recent 10-K in order to discern as to whether or not there would be any risk with VISI. (VISI’s Most Recent 10-K)

We came away with an opinion that VISI may not be exposed to risk from the Visa Bill. We didn’t see anything in VISI’s 10-K that indicates a meaningful portion of their business came from Visa holders or from overseas. VISI has very little revenue and assets overseas.

Furthermore, we did not notice any H-1B Visa risks in the “risk factor” section of the 10-K as we have noticed with some other staffing companies.

Shares of VISI hit and closed at a new high of $8.65 in yesterday’s trading session. The company filed an8-K at around 1:30 PM, after which we issued the following tweet:

As we talked about in our RFT (Reasons for Tracking) from January 17, 2017 and as highlighted from the Barron’s article on January 27, 2017, the sale of its last non-strategic assets, Maintech, could be a near term bullish catalyst for the company. The Barron’s article stated:

“Volt has one last non-core operating business that management is working to sell. The unit, an IT services business known as Maintech, could be worth about $2 a share, according to Taylor. On the January 11 earnings call, CEO Dean reported “we are in the final stages with the lead buyer.”

Shares are up 25% since our original mention and up 7% since we disclosed our long position on January 17, 2016.

Research

Fri, 27 Jan 2017 16:52:11 GMT

VISI ($8.30) - On January 13, 2017 we highlighted VISI’s strong Q4 2016 results when the stock was trading at $6.70. On January 17, 2017 we issued our reasons for tracking. Yesterday morning, Barron’s highlighted VISI in a bullish article titled, “Small Staffing Company Can Deliver Big Gains”. Here are some excerpts from the article:

“Staffing peers, such as Manpower Group (MAN), trade for roughly 15 times estimated earnings. If Volt can pull off its turnaround, Taylor thinks a comparable multiple is reasonable. At 15 times his estimate, the shares would be worth $18.

Volt has one last non-core operating business that management is working to sell. The unit, an IT services business known as Maintech, could be worth about $2 a share, according to Taylor. On the January 11 earnings call, CEO Dean reported “we are in the final stages with the lead buyer...

...Volt, too, is in line to receive a $16 million tax refund that it could collect in the next four months. The tax refund, amounting to nearly 80 cents a share, and the sale of Maintech, are apt to be catalysts for the stock.

In its core staffing business, Volt is focused on returning to revenue growth. Installing a performance-based compensation system for its employees has been part of that, and it’s leading to improvements.”

Research

Tue, 17 Jan 2017 15:05:45 GMT

VISI ($8.05) Volt Information Sciences, Inc. provides staffing and information technology (IT) infrastructure services in the United States and internationally. VISI has lost money for 5 years in a row

	2016	2015	2014	2013	2012	2011
Sales	$1.33B	$1.49B	$1.71B	$2.01B	$2.24B	$2.23B
EPS	($0.70)	($0.95)	($0.16)	($0.61)	($0.65)	$0.75

But VISI came across our radar on January 12, 2017 when the Company reported strong Q4 2016 non-GAAP EPS results and offered InfoArb type bullish commentary in its respective conference call.

We encourage you to read this 2016 investor presentation that lays out VISI restructuring process.

Our reasons for optimism:

1. Crushed analyst EPS estimates

Reported strong non-gaap EPS for Q4 2016 of $0.23 vs $0.15 in the prior year and well ahead of analyst estimates of $0.04.

2. Information Arbitrage presented in conference call , but not in the earnings press release.

Looks like cost cutting moves will save VISI around $0.75 in EPS for 2017. The number is very significant considering analyst 2017 EPS estimate is $0.47.

“We incurred restructuring and severance costs of approximately $1.2 million in the fourth quarter as a result of our continued cost-cutting initiatives. Looking ahead, we expect the actions taken this year will result in annual savings of approximately $15 million going forward, excluding Maintech.” (Q4 2016 CC)

3. Sales levels stabilizing because of several new significant customer wins coupled with a slower rate of decline from existing customers.

“In addition, we continued to add our book of business with several significant new customer engagements. This coupled with a slow rate of revenue decline from existing customers, is helping to stabilize revenue from our core North American Staffing business.” (Q4 press release)

4. The company has embarked on 3 key pillars it set in 2014:

Improved cost structure by focusing on higher margin markets and creating a more efficient organizational structure by investing in back office technology and reducing redundancy.

Margins increased in Q4 with gross margins reaching 16.7% up 70 basis point vs prior year.

“We concluded fiscal 2016 with a solid fourth quarter highlighted by strong year-over-year growth in gross margin percentage along with careful expense management that helped produce the most profitable quarter for Volt in five years. (Q4 Press Release)

“During the course of the year, we were able to extract approximately $27.1 million of selling, administrative and other operating costs out of the business, net of investing in our sales force and other resources, which we expect to help contribute to an improved fiscal 2017” (Q4 Conf Call)

“Reduced fourth quarter selling, administrative and other operating costs by $4.6 million, or 8.4% year-over-year; Reduced full year selling, administrative and other operating costs by $27.1 million, or 11.7% year-over-year, as a result of headcount reductions and other initiatives to improve operating efficiencies” (Q4 Press Release)

Divested non-strategic assets to shore up balance sheet

“During fiscal 2016 and 2015, we sold our staffing business in Uruguay, our Computer Systems segment, the telephone directory publishing and printing business in Uruguay, and we exited our telecommunication infrastructure and security services government solutions business. Each of these businesses had significantly different risk and return profiles than our core staffing services. Although these transactions netted nominal proceeds, the operations of these businesses were either break-even or generating operating losses. These divestitures also enabled the Company’s management to focus resources on opportunities within our core staffing services where we believe we are better positioned to add value to the Company. Also as part of this strategic plan, we intend to sell our information technology infrastructure business (“Maintech”).

During this past year, we have strengthened Volt’s balance sheet and over the past several years we have improved our liquidity position, in large part through the divestiture of several non-core legacy assets, the successful monetization of non-strategic company-owned real estate and the reduction and refinancing of outstanding debt. In January 2017, we amended and extended our Financing Program, which maintained the capacity at $160.0 million, while extending the term through January of 2018.” (10K)

VISI claims that it is the final stages of selling its last non-strategic asset, Maintech. So once this task is completed we assume more cost savings could be in the cards.

Achieve Top line growth:
- After 5 years of declining sales, the company believes 2017 will be a year it begins to concentrate on growing its top line by exploring more revenue from its current client base, targeting higher growth markets and incentivizing the sales force.
  - “We believe that the actions we took in fiscal 2016 and will take in fiscal 2017 will ultimately drive higher revenues. In fiscal 2017, we intend to improve top-line growth by expanding our business with existing customers and winning new profitable business.” (10K)
  - “As we head into fiscal 2017 as a financially stronger and more streamlined company, I am confident we will continue to build on the foundational strengths of our core staffing business to achieve our longer-term goal of sustained profitable growth.” (Q4 Press release)

5. Analyst will likely have to increase estimates

After the company smashed Q4 analyst EPS estimates on the heels of cost cutting measures and improved margins, it is likely analyst will need to revise EPS estimates given the company has stated it sees nearly $15 million in additional cost savings for fiscal 2017. As noted above, cost cutting moves will save them $0.75 in EPS for 2017. The number is very significant considering analyst 2017 EPS estimate was/is $0.47.

6. New board and management as indicated in investor presentation. We are taking a closer look at management’s profiles. We believe the new management arose from the proxy fight in 2014.

7. Long standing relationships (from presentation)

8. High growth industry segments where VISI has no presence (from presentation)

Valuation:

Using analyst estimated sales of $1.39 billion for fiscal 2017 and applying Q4 margins (1.4%), our Geo-Calculated non-GAAP EPS estimate for 2017 is $0.95 which is well above analyst estimates of $0.47. It is unclear how much of the margin savings were already embedded in 2016 Q4 numbers. We will continue to look into all possible scenarios and hope to gather more answers when we speak with management.

Applying a P/E multiple of 15 to what we feel could be the low end EPS for fiscal 2017 of $0.95, our near term price target is $14.25.

Caveats

At a billion dollars in revenue it is unrealistic to assume that huge leaps in revenue will occur
Our 2017 EPS estimate is very preliminary. Using only Q4 margins does not take into account some seasonality in VISI’s business. Also, we can’t trust analyst revenue estimates since the company just missed analysts’ Q4 revenue estimate.
Management has been trying to sell its last non-core asset for about a year now. So investors may perceive that they are “crying wolf.” On that same note, management has was upbeat about the potential results of its restructuring last year too, with only minimal carry through on the bottom line (until Q4).

Research

Fri, 13 Jan 2017 16:56:32 GMT

VISI ($7.30) - In yesterday’s email, we highlighted VISI’s strong Q4 2016 results. We would like to issue a small correction: after further analysis, our non-GAAP EPS was $0.23 for the quarter, as opposed to the $0.28 number we gave yesterday. This amended number is still well above analyst estimates of $0.04.

Later in the day, we issued an information arbitrage alert (#InfoArbAlert) via Twitter regarding our findings from the conference call transcript. We encourage interested investors to read the full transcript here. Our premium alerts were as follows:

Volt Information Sciences, Inc. provides staffing and information technology (IT) infrastructure services in the United States and internationally. We will be looking to set up an interview with the company.