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ALJ Regional Holdings, Inc. Announces Earnings For The First Quarter Ended December 31, 2017

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NEW YORK, Feb. 14, 2018 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) ("ALJ") announced results today for its first quarter ended December 31, 2017. 

ALJ is a holding company, whose primary assets are its subsidiaries Faneuil, Inc. (including the customer management outsourcing business recently acquired from Vertex Business Services LLC, "Faneuil"), Floors-N-More, LLC, dba Carpets N' More ("Carpets"), and Phoenix Color Corp. (including the recently acquired printing components business, "Phoenix").  Faneuil is a leading provider of call center services, back office operations, staffing services, and toll collection services to government and regulated commercial clients across the United States. Carpets is one of the largest floor covering retailers in Las Vegas, Nevada, and a provider of multiple products for the commercial, retail and home builder markets including all types of flooring, countertops, cabinets, window coverings and garage/closet organizers, with four retail locations, as well as a stone and solid surface fabrication facility. Phoenix is a leading manufacturer of book components, educational materials and related products producing value-added components, heavily illustrated books and specialty commercial products using a broad spectrum of materials and decorative technologies.

Our financial statements reflect the operations of Faneuil, Carpets and Phoenix throughout all periods presented, our customer management outsourcing business ("CMO Business") since May 26, 2017, and our recent acquisition of certain assets and liabilities ("Printing Components Business") from Moore-Langen Printing Company, a division of LSC Communications, Inc., since October 2, 2017. 

Investment Highlights

Consolidated Results for ALJ

  • ALJ recognized consolidated revenue of $95.0 million for the three months ended December 31, 2017, an increase of $17.3 million, or 22.3%, compared to $77.6 million for the three months ended December 31, 2016 due to the acquisitions of the CMO Business by Faneuil and the Printing Components Business by Phoenix, which together accounted for $13.0 million of the total revenue increase, and increases in business activity in the Faneuil and Carpets segments.  Excluding the impact of acquisitions, total revenue increased $4.3 million, or 5.6%.  ALJ recognized consolidated revenue of $86.3 million for the three months ended September 30, 2017.
  • ALJ recognized net loss of $5.3 million and loss per share of $0.14 (diluted) for the three months ended December 31, 2017, compared to net income of $0.6 million and earnings per share (EPS) of $0.02 (diluted) for the three months ended December 31, 2016.  Increased revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix, higher start-up costs of certain contracts, higher selling, general and administrative costs due to increased depreciation and amortization expenses related to acquisitions, and increased provision for income taxes to reflect a one-time, non-cash deferred income tax expense of $4.1 million as a result of the Tax Cuts and Jobs Act of 2017.  Excluding such deferred income tax expense, ALJ recognized net loss of $1.2 million and loss per share of $0.03 (diluted) for the three months ended December 31, 2017.  ALJ recognized net income of $13.8 million and EPS of $0.37 (diluted) for the three months ended September 30, 2017, which included additional benefit from income taxes due to the reduction of the deferred taxes valuation allowance.  Excluding such benefit from income taxes, ALJ recognized net income of $1.7 million and EPS of $0.04 (diluted) for the three months ended September 30, 2017. 
  • ALJ recognized adjusted EBITDA of $6.6 million for the three months ended December 31, 2017, a decrease of $0.6 million, or 8.8%, compared to $7.2 million for the three months ended December 31, 2016.  Decreased adjusted EBITDA was primarily due to higher costs in Carpet's granite business, lower volumes for books and components at Phoenix, and transition expenses associated with the CMO Business acquisition. ALJ recognized adjusted EBITDA of $7.9 million for the three months ended September 30, 2017.

Jess Ravich, Executive Chairman of ALJ, said, "While results were challenged this quarter, we continue to focus on growing each of our businesses, generating efficiencies and lowering our overall cost structure to increase shareholder value."

Amounts in $000's, except per share amounts


Three Months Ended
December 31,












2017



2016



$ Change



% Change




(unaudited)



(unaudited)










Net revenue


$

94,954



$

77,617



$

17,337




22.3%


Costs and expenses:

















Cost of revenue



74,910




60,181




14,729




24.5%


Selling, general, and administrative expense



19,538




14,383




5,155




35.8%


(Gain) loss on disposal of assets, net



(207)




8




(215)



NM


Total operating expenses



94,241




74,572




19,669




26.4%


Operating income



713




3,045




(2,332)




(76.6%)


Other expense:

















Interest expense, net



(2,660)




(2,434)




(226)




(9.3%)


Total other expense



(2,660)




(2,434)




(226)




(9.3%)


(Loss) income before income taxes



(1,947)




611




(2,558)



NM


Provision for income taxes



(3,371)




(60)




(3,311)



NM


Net (loss) income


$

(5,318)



$

551



$

(5,869)



NM


Basic (loss) earnings per share of common stock


$

(0.14)



$

0.02



$

(0.16)






Diluted (loss) earnings per share of common stock


$

(0.14)



$

0.02



$

(0.16)






Weighted average shares of common stock outstanding:

















Basic



37,577




34,575




3,002






Diluted



37,577




35,712




1,865























NM - Not Meaningful

















Results for Faneuil

Anna Van Buren, CEO of Faneuil, stated, "Highlighting Faneuil's first quarter was the award and start of a long term contract with the Virginia Department of Transportation for the operation of its E-ZPass service center and the positive performance of our growing healthcare programs."

Faneuil recognized revenue of $51.5 million for the three months ended December 31, 2017 compared to $38.1 million for the three months ended December 31, 2016.  Revenue increased $13.4 million, or 35.3%.  Excluding the impact of the CMO Business, revenue increased $4.9 million, or 12.9%, due to increased revenue from our existing customer base.  Faneuil recognized revenue of $44.0 million for the three months ended September 30, 2017. 

Faneuil recognized segment adjusted EBITDA of $3.7 million for the three months ended December 31, 2017 compared to $3.8 million for the three months ended December 31, 2016.  Higher expenses for training and call handling for the new CMO Business offset the increased net revenue recognized.  Excluding the impact of the CMO Business, segment adjusted EBITDA increased by $0.1 million, or 1.5%.  Faneuil recognized segment adjusted EBITDA of $2.8 million for the three months ended September 30, 2017.

Faneuil estimates its revenue for the three months ending March 31, 2018 to be in the range of $41.8 million to $46.3 million, compared to $36.7 million for the three months ended March 31, 2017. 

Faneuil's contract backlog expected to be realized within the next twelve months as of December 31, 2017 was $97.8 million compared to $81.7 million as of December 31, 2016 and $91.6 million as of September 30, 2017.  Faneuil's total contract backlog as of December 31, 2017 was $274.6 million as compared to $223.6 million as of December 31, 2016 and $236.8 million as of September 30, 2017.

Results for Carpets

Steve Chesin, CEO of Carpets, stated, "This quarter's result was impacted by additional costs in our granite business.  We are focused on improving operating performance in each of our businesses and continue to see benefits from a strong housing market in Las Vegas."

Carpets recognized revenue of $16.7 million for the three months ended December 31, 2017 compared to $15.5 million for the three months ended December 31, 2016.  Revenue increased $1.1 million, or 7.1%, which was primarily attributable to higher sales volumes from cabinet and granite products.  Carpets recognized revenue of

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