Black Box Corporation (NASDAQ:BBOX) Q3 2016 Earnings Conference Call - Final Transcript

Jan 26, 2016 • 05:00 pm ET

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Black Box Corporation (NASDAQ:BBOX) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen, and welcome to the Black Box Corporation Third Quarter of Fiscal 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions)

I would now like to introduce your host for today's conference Mr. Ron Basso, Executive Vice President of Black Box Corporation. Please go ahead, sir.

Executive
Ron Basso

Thank you. Good evening and welcome to Black Box Corporation's third quarter of fiscal 2016 earnings conference call. With me today are Mike McAndrew, our President and CEO; and Tim Huffmyer, our Vice President and Chief Financial Officer. Earlier today, we announced our third quarter fiscal 2016 results by issuing a press release and furnishing it to the Securities and Exchange Commission on Form 8-K. We also posted this press release in the Investor Relations section of our website, blackbox.com.

In addition to commentary from Mike and Tim, we have a brief slide presentation supplementing the call. Those slides are also available in the Investor Relations section of our website. For those of you who are accessing the webcast, the slides will present on your screen. (Forward-Looking Cautionary Statements)

Now, I'd like to turn the call over to Mike.

Executive
Mike McAndrew

Thanks, Ron. Welcome everyone and thank you for joining us today. I'd like to start with a review of our third quarter of fiscal 2016 results. Our revenues were $222 million, with operating earnings per share of $0.37, and cash from operations of $29 million.

During the quarter, we experienced above average gross profit margin that along with our cost containment efforts allowed us to come within our profit guidance despite lower than expected revenues. As expected, we had a strong cash flow quarter. This allowed us to achieve our lowest net debt position in over 10 years and to reduce our leverage ratio to 2.8 times.

Regarding our revenues for 3Q 2016, our Federal business and products business performed as anticipated, and so our mix was primarily due to our commercial services business. Currency also had a slight impact on revenues for the quarter. But our immediate challenge continues to be sales execution in our commercial services business. Following Tim's remarks, I will discuss this in more detail.

Our revenue mix in 3Q 2016, along with a sequential decrease in backlog in both our commercial and federal services businesses are negatively impacting our view for the remainder of fiscal 2016. Our federal business will also be adversely impacted by a delay in a large project that was scheduled for 4Q 2016.

Given that we've not been achieving our revenue guidance, our revised outlook to some extent reflects an addition dose of conservatism due to the performance of our sales organizations and our federal business. In addition, we expect gross margin to return to more traditional levels and that is reflected in the 4Q 2016 guidance.

Given this outlook, we will continue to focus on managing our expenses in line with these