5 Things You Need To Know Ahead Of Black Box's Earnings Call

Black Box Is Set To Release First-Quarter Earnings Monday

Black Box has been struggling to right the ship since the company’s stock value plunged 62 percent in 2015. Joel Trammell, the company's third CEO since that nosedive, believes the company is positioned for growth in the next two years. Under his leadership, Black Box has won an extension on paying down $150 million in debt and is in the midst of selling its federal business.

But the clock is ticking. The Lawrence, Pa.-based solution provider has said that a deal for the federal business must close by the end of the month to keep the banks from calling in the debt. Trammell said there were multiple bidders for the business; however, an agreement has not yet been announced. Meanwhile, in a sign, that the company's fortunes are not sitting well with investors, shareholders recently voted to reject executive officer pay, including Trammell's modest-by-comparison $750,000 salary.

The company has enjoyed some positive news, however, including this week’s news that its recently released Secure KVM Switches were approved for government sale.

Here are five key issues to know ahead of Monday’s earnings report.

Fidelity’s SEC Filing

In February, Abigail Johnson and Fidelity's Low Priced Stock Fund announced in an SEC filing that they held an 11.9 percent ownership stake in Black Box, amounting to 1.8 million shares. That ended on Aug. 9, when the company in a new filing said it “ceased to be the beneficial owner of any of the class of securities” in the company.

From Switches To Riches

Black Box Monday said its line of Secure KVM Switches had been added to the National Information Assurance Partnership (NIAP) product-compliant list. That news caused stock prices to jump 11 percent to $1.68 a share Monday. The new Black Box Secure KVM line includes the industry's first NIAP 3.0-certified secure KVM matrix switches and a KVM protector, the company said in a press release. Altogether, they isolate each computer source with shared peripheral access to protect classified information against accidental transfer, unauthorized access or compromise of data, making them ideal for military and defense applications, the company said.

Announcing The Sale Of Its Federal Business Delayed

In July, Black Box shares fell to 77 cents, their lowest-ever level after the company said in an 8-K filing that it had reached an agreement with lenders to forestall paydown of $150 million in debt until the sale of the federal business closes. Under the terms of the agreement with lenders, Black Box said it would name a buyer for the federal business by the end of July. That day has come and gone with no announcement, but Black Box said in an SEC filing last week that it received an extension from its lenders regarding the timing of the execution of a definitive agreement to sell its federal business. The company will provide a sale announcement when the agreement is executed, it said. Management believes that this transaction remains on track to close by the end of August.

Shareholders Reject Executive Pay

In what amounts to a rare rebuke of executive leadership, Black Box shareholders voted down executive compensation, saying no by a 12 percent margin, according to an SEC filing this week. According to the SEC filing, 56.3 percent of shareholders – or 4.14 million votes – said no to the board's recommended pay structure, with 43.6 percent, or 3.21 million shares, siding with the board. It's rare for executive compensation votes to fail. According to a June 6 analysis from executive compensation consulting firm Semler Brossy, just 2.1 percent (32 of 1,498) Russell 3000 companies have had their compensation proposals rejected so far in 2018.

Social Media Deal

Shortly after Black Box spooked investors with dire warnings of possible bankruptcy and lacking the cash on hand to see January 2019, it unveil3d a deal with a “social media giant” which Trammell also dubbed “the largest social media” company in the world.

The initial $10 million contract calls for Black Box to build out a 1 million-square-foot data center, and lay 100 miles of cable in Ohio, for which it will hire 70 people. Trammell said Black Box has done similar work for the same company in Sweden. While the name of the company has not been disclosed, the contract was seen as a win by investors, who responded by catapulting the stock up 113 percent to $2.03 a share. Stocks on Thursday afternoon were trading at $1.57.