Volt Information Sciences, Inc. Q3 FY2021 earnings call

• The company's third quarter financial results mark a milestone with year-over-year revenue growth and positive net income in consecutive quarters for over a decade, along with improvements in gross margin and SG&A as a percentage of revenue.
• All three operating segments - North American Staffing, North American MSP, and International - delivered year-over-year revenue growth and positive operating income, and improved revenue sequentially when adjusted for working days.
• Discussed the shifting impact of COVID-19 and Delta variant, including labor shortages due to factors like childcare issues, vaccine mandates. Addressed labor shortages through technology and intensified candidate attraction efforts, such as expanding candidate engagement and chatbot technology, introducing a scheduling tool, and investing in an AI-powered job board.
• Highlights by segment: North American Staffing had top and bottom line growth for the third consecutive quarter, with retail business showing 28% growth; International segment made progress in some disciplines but faced talent supply challenges; North American MSP was hampered by delayed decision-making, M&A activity, etc., and prioritized sales efforts in specific areas.

For the third quarter of 2021, on a GAAP basis, revenue was $217.5 million, an increase of $31.6 million or 17% compared to the prior year comparable quarter. After adjusting for favorable currency translations, overall company revenue increased $29.3 million or 15.5%. The North American Staffing segment had adjusted revenue of $179.4 million, a 15.9% increase from the prior year. The International Staffing segment had adjusted revenue of $28.3 million, a 17.3% increase from the prior year. The North American MSP segment had adjusted revenue of $9.8 million, a 3.8% increase from the prior year. The North American Staffing segment's operating income was $8.3 million, a $5.6 million increase from the prior year. The International staffing operating income was $1.2 million, a $0.6 million increase from the prior year. The North American MSP operating income was $0.6 million, a $0.4 million decrease from the prior year. Each segment achieved year-over-year revenue growth and positive operating income for the quarter, and saw sequential revenue improvement when adjusted for working days.

• Anticipate revenue to improve 5% to 7% over last year in the fourth quarter of 2021.
• Expect gross margin to be in the low to mid-16% range in the fourth quarter of 2021.
• SG&A is expected to be in the $34 million to $35 million range in the fourth quarter of 2021.
• Believe the combination of increased revenue and favorable cost comparisons will lead to improved operating income and EBITDA compared to the prior year quarter.

• Potential impacts of the COVID-19 pandemic on business operations, including labor shortages, candidate deferrals/withdrawals, and ongoing restrictions in operating countries.
• Talent supply challenges in various countries like the UK, France, Singapore, Belgium, including issues like fewer foreign candidates post-Brexit, unprecedented talent shortages, longer work visa processing times.
• Delayed decision-making on RFPs, robust M&A and consolidation activity within multiple clients, and lack of available candidates especially in certain skill sets.

Q: How is order flow and fulfillment performance in light of supply constraints compared to previous periods?

A: Order volume is exceeding pre-pandemic levels. Fill rates are in line with pre-pandemic levels through additional investments, leveraging technology, and expanded recruiting strategies.

Q: Is there any easing of supply constraints in certain sectors, skill sets, or geographies?

A: There was a significant uptick in candidate applications last week without the unemployment stimulus, but one week doesn't constitute a trend. Still facing headwinds but initial signs of improvement are present.

Q: What are the plans regarding digital and tech-enabled capabilities investments and capital allocation?

A: There will be a combination of investments, with a priority on making the business more efficient. Continuing projects to assist recruiters and the sales force, and focused on improving client servicing.

Q: What's the theory behind the increase in candidate applications last week after the unemployment stimulus rollback?

A: States with higher unemployment and higher benefits saw the uptick. Also considering the impact of vaccine mandates causing initial turnover among candidates.

Q: Update on the California headquarters lease and the pricing environment?

A: The ownership of the California headquarters changed recently, and discussions will be held with the new owners, potentially leading to subletting. There is pricing pressure from larger clients due to supply chain challenges, but the company remains disciplined in pricing new business and having conversations about wages and bill rates.