ModusLink Global Solutions (MLNK)
Q2 2011 Earnings Call
March 07, 2011 5:00 pm ET
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Steven Crane - Chief Financial Officer and Principal Accounting Officer
Hello, and welcome to the ModusLink Global Solutions Second Quarter Fiscal 2011 Conference Call. [Operator Instructions] Now I would like to turn the call over to Mr. Joseph Lawler, Chairman, President and CEO; and to Mr. Steven Crane, Chief Financial Officer. Please go ahead, Mr. Crane.
Thank you, Dawn. Good afternoon, everyone, and thank you for joining us for ModusLink Global Solutions Fiscal 2011 Second Quarter Conference Call. I'm Steve Crane, CFO, and I'm joined today by Joe Lawler, Chairman, President and CEO.
In just a few moments, Joe will discuss our announcement of a special cash dividend to ModusLink stockholders, as well as his thoughts on the company's financial performance and the market environment over the past quarter and provide an update on our strategic initiatives. After Joe's initial comments, I will review in more detail our fiscal 2011 second quarter results, which we released earlier today.
Before we start, I want to remind you that this call is being broadcast as a live webcast from our website at www.moduslink.com. Please also note 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 and a discussion of our use of these measures can be found in our earnings release issued earlier today, a copy of which is posted in the Investor section of our website.
I'd now like to turn this call over to Joe Lawler. After our formal remarks, we'll be happy to take your questions. Joe?
Thank you, Steve, and good afternoon. Before I turn to our second quarter earnings results, I want to start by saying that I'm pleased to announce that our board of directors has approved a one-time special cash dividend in order to directly return value to ModusLink stockholders. This is a special cash dividend of $40 million in aggregate or approximately $0.91 per share. We carefully evaluated our balance sheet, and given ModusLink's liquidity and long-term outlook, the board unanimously determined that it was appropriate to return a portion of the cash on hand to stockholders. This distribution reflects the confidence we have in ModusLink and its ability to generate cash flow on a long-term basis. ModusLink has a strong history of returning excess cash to our stockholders. Including today's special dividend, the company has returned nearly $100 million since fiscal 2008. The full details of this special dividend are available in a separate press release, which we issued earlier this afternoon.
We've also announced our financial results for the second quarter and I'll talk about the period's main drivers, then later in the call, I'll discuss ModusLink's go-forward plans. Revenue in the second quarter was slightly higher than our expectations. We saw improved volumes from certain client programs with our base business and we continue to grow revenue from new programs as a result of our sales and marketing initiatives. However, we continue to experience the headwinds we've described in recent quarters and our revenue mix in the second quarter was less profitable than we expected. Our results this quarter also include impairments charges, which we'll discuss in a moment.
We have a lot of work in progress to put ModusLink on a trajectory of sustained growth in revenue and profits, and today, I'll talk about many of the actions we're taking to get that done. Regarding revenue for the quarter, I'll start by discussing the revenue from new programs, which consists of client programs we've been executing for less than 12 months and then I'll go on to revenue from our base business, which consists of programs we've been executing for 12 months or more.
Revenue from new programs was up 71% and was at its highest level since the July 2009 quarter. This was primarily due to programs secured in prior quarters that were the direct result of our sales and marketing initiatives. We are winning new programs, and clients are recognizing the value of our outsourced supply chain solutions. We're encouraged by our progress as we work to build back to the record revenue from new programs that we achieved in fiscal 2009. We believe that level is needed to achieve sustainable growth and consolidated revenue. Our pipeline of opportunities continues to be robust and we expect revenue from new programs in fiscal 2011 to be significantly higher than the $80 million we achieved in fiscal 2010.