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Black Box CEO Remains Bullish As Losses Mount

Despite CEO Joel Trammell reaffirming faith in the company's future, Black Box posted a steep net loss in revenue.

Black Box on Monday posted a steeper net loss as revenue declined in its latest fiscal year compared to the same period a year before -- even as its CEO reaffirmed faith in the company’s future.

The Lawrence, Pa.-based IT solutions provider recorded a $100.1 million net loss for fiscal 2018, which ended March 31. That's more than $7.1 million net loss that the company reported during the same period a year ago.

Revenue for the fiscal year was $774.6 million, down 9 percent from last year when sales reached $855.7 million. According to the company, it last recorded growth in 2015 with revenue of $992.4 million. The company has seen its sales decline in each year since then. Black Box shares declined 24 percent to $1.74 during trading on Monday.

Nonetheless, Black Box CEO Joel Trammell told investors that each of the company’s three businesses: products, commercial services, and federal services, are heading for gains. He described its federal business as being on a ’growth curve,’ and said the other two divisions had ’significant growth and profitability opportunities.’

’Last quarter was my first Black Box earnings call,’ he said. ’On that call I gave you my view of each of our businesses. Products, commercial services, and federal services. I noted that they each are, in their own way on a good path towards growth, with the ups and downs that occur in any project driven business like ours. I am today, reaffirming that belief.’

Despite the positive outlook, Trammell said Black Box must part with its federal services business to pay down approximately $155 million in debt. The sale is crucial to the company’s future, as it explained in a recent regulatory filing that stated, if the deal does not happen, the company may not exist as a going concern beyond the end of the year.

Though banks are demanding that sale happen by Aug. 31, Trammell said the company was already considering selling the unit, and using that capital to grow its commercial services and products division.

’You may ask, why sell the federal services business?’ he said during the call. ’We need capital to pay down our debt. The most efficient way for us to raise that capital is to sell assets. Our federal business is on a growth curve, and is positioned well in its markets. This business runs pretty much on a stand-alone basis, so its easy to separate from the rest of Black Box.’

Trammell said while the company has considered selling other parts of the business, for now, federal services is the only component up for sale, Trammell said.

’We’ve talked about various non-core assets, but at this time we have nothing to announce,’ he said.

For the quarter, revenue was down $14.2 million or 6.8 percent to $194 million. The company also posted a net loss $51 million, compared to a loss of $1.8 million in the year ago quarter.

Trammell said the commercial services business has been realigned as of July 1 to better serve global enterprise clients seeking managed services, as well as clients with a site specific infrastructure or UCC project.

’This new structure will created better alignment among our sales, engineering, and operations groups,’ he said. ’While this is going to create efficiencies internally, most importantly it will allow us to better serve our clients in a way that is most helpful to them.’

Commercial services is also home to a $10 million contract the company won with a ’social media giant’ it has yet to name. That contract could be worth up to $300 million in future work, Trammell said.

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